Analyst: Morgan Stanley-Citi deal could eat into Legg Mason's profits - San Francisco Business Times:

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On June 1, Morgan Stanleyu (NYSE: MS) and Citi (NYSE: C) finalized theie deal to combine the wealth managemenrt businesses of Morgan Stanleyand Citi’s division. The new MorganStanley SmithBarney, oversees $1.7 trillion in client Baltimore-based Legg Mason (NYSE: LM) manages between $25 billioj and $30 billion in money market sweep assets for Smith Barney an amount that could be reduced or lost entireluy as a resultof Citi’s deal with Morgan Stanley, FBR analysg Matt Snowling wrote in a research note.
A cash swee p occurs when uninvested funds ina customer’s account are investeed automatically into a money market account so they don’tt sit in the account without earning interest. Morganb Stanley, which already handlesd its own cashsweep program, could move the businesa currently handled by Legg Mason in-house. That coulxd slice as much as 10 cents a shars fromLegg Mason’s earnings starting next year, Snowliny wrote. “Mitigating the impact somewhat is the timingf ofany changes, which would not likelh occur until 2010, give the time line for integrating the account technology of the two he wrote. Executives with Legg Mason could not beimmediatelhy reached.