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Hey Citigroup: Morgan Stanley wants more of Smith Barney

May 31, 2012: 11:01 AM ET

Morgan Stanley (MS) is upping its stake in the wealth brokerage unit it has shared with Citigroup (C) since the two firms struck a deal in 2009 to merge their divisions.

Early Thursday, Morgan Stanley said it plans to buy a 14% stake in Morgan Stanley Smith Barney, which was created out of a merger between Citi and Morgan's wealth management units. Morgan Stanley already owns 51% of the business and the new purchase will raise that to 65%.

The two firms will agree to a price by Sept. 1.

Morgan Stanley has the option to buy the rest of the unit, which comes with roughly 17,200 financial advisers, over the next two years. It's also a business that's considered a source of relative calm, compared with Morgan Stanley's more volatile trading and investment banking units.

Morgan Stanley's stock has had a rough year, falling nearly 14% from January, while Citi has fared much better, with its stock just 1.2% lower.

Both banks have had their public images further bruised this year, but Morgan Stanley has taken the spotlight in the past few weeks.

Questions and finger pointing surrounding Morgan Stanley's underwriting of Facebook's (FB) IPO have taken center stage, and perhaps given Citi's executives and board a few minutes to catch their breath. Citi's shareholders rejected CEO Vikram Pandit's $15 million pay package in mid-April and are still waiting to hear back from the board on what it plans to do next.

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