Chillin' out till it needs to be funded
The bank which is apparently acting on a quick menu to get rid of Capital loading it can work without has already seen a lot of brokerage losses after it took over a majority stake in Salomon Smith Barney back in the day now more than six years to the day. In the next step to let go of Smith Barney , the bank had signed back with Morgan Stanley for a joint venture model and the resulting brokerage as then agreed to go to total Morgan Stanley ownership from the 49% Citi owned on Day 1 of the JV.
MSSB has bled a lot of managed funds since its management initially changed hands in 2006 and the JV was not very profitable for Citi leaving the bank and its then chairman Prince speaking to a new split up model separating investment banking and banking models. Former hedgie Vikram Pandit lost the Private Equity arms for lack of capital and for new banking regulation earlier in 2009 and the run off portfolio of mortgages is still over $100 B but less than one sixth of the original portfolio the bank risked up in 2008 and pushed into a bad bank
According to Andy Sorkin’s dealbook, Citi had asked for $23 B as the security arm’s valuation while Morgan Stanley had pushed for a figure close to $9 B. However independent auditors confirmed a valuation of $13.5 B leaving Citi $4B richer for the piece and $1.85B in this transaction for 14%. The final 20% will be picked up by MS in June 2015 obviously to another new round of valuation while 1another 15% is per agreement to be roped in by June 2013