Morgan Stanley to buy Citigroup's remaining stake in wealth-management JV

Morgan Stanley to buy Citigroup's remaining stake in wealth-management JVMorgan Stanley has confirmed that it would acquire the remaining 35 stake of its wealth-management joint venture (JV) from Citigroup Inc. by the end of June.

The two banks had set up the wealth-management JV 2009. The deal started during the global financial crisis in a bid to stabilize both banks. 

For the remaining 35 per cent stake, Morgan Stanley will pay $4.7 billion to Citigroup. In addition, it will pay nearly $2 billion to redeem preferred securities of Citigroup.

In January this year, Morgan Stanley CEO James Gorman said that the purchase of Citigroup's stake would place demands on an additional $400 million of capital.

The CEO said in a statement, "This is a historic day for Morgan Stanley. It is the culmination of a multiyear effort to transform our business model into one that offers stronger shareholder returns."

He added that the deal would give investors more assurance about the business model of Morgan Stanley, as a reliable generation of income from wealth management would help the bank offset volatility in trading & investment banking.

In the FY2012-13, Morgan Stanley's wealth management business generated $13.5 billion in net revenue, 44 per cent of its total adjusted net revenue. Market analysts are of the view that wealth management business would account for more than 50 per cent of the bank's overall revenue over time.