Officials at the embattled banks Citigroup and Morgan Stanley will negotiate over the weekend about possibly combining their wealth management businesses, a deal mostly aimed at bolstering Citi with much-needed cash.
The deal to merge Citi's Smith Barney with Morgan Stanley's comparable division was confirmed today by a person familiar with the talks, who spoke on condition of anonymity because he was not authorised to discuss the matter.
The negotiations come as investors digested news that Robert Rubin, a senior adviser to Citi who has drawn heavy criticism, would resign from the bank.
The person said it was Rubin's decision to leave Citigroup and that "there was no inside pressure," or government pressure. Citi's shares sank nearly 6 per cent yesterday.
Even before the economy started tanking, many shareholders had complained that Citigroup was too huge, and lagging its peers. Calls for a breakup have been going on for years, and have grown louder since the federal government has had to pump billions into the ailing company.
The New York-based bank late last year signed an agreement with the federal government to receive an additional $20 billion on top of the initial $25 billion it received.
Citigroup was hit particularly hard by the housing market downturn because the bank was heavily invested in mortgages and other loans.
The company has reported four straight quarters of losses, and is expected to post yet another loss when it releases fourth-quarter results later this month.
