Morgan Stanley said it would look to buy an additional 14 per cent of Smith Barney from Citigroup, tightening its grip on the retail brokerage that is the bank’s biggest revenue generator.
Smith Barney, whose brokers advise wealthy private investors, is already 51 per cent-owned by Morgan Stanley, which has options to buy the remaining stake in steps.
It will now enter into a negotiating process with Citi to determine the price, which could last up to three months. Executives rejected the idea of trying to buy the remaining stake in one stage.
Morgan Stanley Smith Barney has been beset by technical difficulties as it tries to meld computer systems from various legacy companies. Analysts believe the issue will be solved this year, drawing significant cost savings.
In the first quarter, Morgan Stanley’s global wealth management division, which includes Smith Barney, reported net revenues of $3.4bn and net income of $387m, making it bigger than the group’s investment banking division.