Citigroup Inc., the third-biggest U.S. bank by assets, may take a charge of almost $6 billion this quarter as it writes down the value of the Morgan Stanley Smith Barney venture, said Jason Goldberg, a Barclays Plc analyst.
The lender, negotiating the sale of a 14 percent stake in the brokerage to New York-based Morgan Stanley, could see its tangible book value decline by 2.5 percent as a result, Goldberg said yesterday in a note to clients. The charge would be more than double the third-quarter average profit estimate of $2.88 billion by 13 analysts in a Bloomberg survey.
The banks dispute the value of the brokerage, leading New York-based Citigroup last month to say that it may take a “significant” charge as the deal is completed. Ed Najarian, an analyst at International Strategy & Investment Group Inc., estimated a $3.3 billion charge and Charles Peabody at Portales Partners LLC predicted $3.2 billion.
The banks hired Perella Weinberg Partners LP to decide the stake’s value. The deal is set to be completed by Sept. 7. Morgan Stanley, led by Chief Executive Officer James Gorman, owns 51 percent of the brokerage. Citigroup owns the rest.
Mark Costiglio, a Citigroup spokesman, declined to comment.
Goldberg has had an overweight rating on Citigroup since at least March 24, 2004, according to data compiled by Bloomberg. The shares have dropped 94 percent since then.
Tangible book value is a measure of how much a company could fetch if liquidated.