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Citi gets rid of Morgan Stanley Smith Barney baggage – Deal Insight / Banking Insight

Smith Barney logo with its common tagline &quo...

Smith Barney logo with its common tagline “They make money the old-fashioned way. They earn it” (Photo credit: Wikipedia)

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

NEW YORK, NY - DECEMBER 16:  Citibank CEO Vikr...

NEW YORK, NY – DECEMBER 16: Citibank CEO Vikram Pandit looks on at the official opening of Citibanks new flagship branch at Union Square December 16, 2010 in New York City. The 9,700 square foot branch features ‘smart banking technologies’ including interactive sales walls, Wi-Fi for customers and customer service experts via video-assist. (Image credit: Getty Images via @daylife)


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This entry was posted on September 11, 2012 by in Amitonomics, Banking, US and tagged , , , , , , , .


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