Morgan Stanley, Citigroup In Talks To Merge Brokerage Business

January 9, 2009 8:51 p.m. EST

New York, NY (AHN) - Citigroup is currently in talks to merge its Smith Barney brokerage unit with Morgan Stanley's brokerage business, according to recent reports.

The deal would involve a payment from Morgan Stanley that would give it a larger stake in the venture, a source said according to CNBC.

Morgan Stanley would also be given the ability to increase its stake in the venture and eventually purchase the whole unit.

A deal would combine Morgan's unit of 8,000 brokers with Smith Barney's 11,000, creating the Country's largest brokerage. Bank of America currently has the largest broker network, totaling 16,000 since the acquisition of Merrill Lynch.

The report of a potential deal comes just hours after Citigroup announced that Robert Rubin will step down as senior counselor. Rubin came under fire as Citigroup began to falter due to investments in collateralized debt obligations, which were largely viewed as his directive.

Rubin, 70, is just the latest of several executives to announce their departure from a major U.S. bank this week. Greg Fleming and Robert McCann said they are stepping down from their posts at Bank of America earlier in the week.

Shares of Citigroup fell 5.7 percent on Friday to close at $6.75.