Citi did not offer brokerage to JPMorgan: sources

By Elinor Comlay

NEW YORK (Reuters) - JPMorgan Chase & Co never had a chance to bid for Citigroup Inc's Smith Barney business, two people familiar with the matter said, but it may still build a retail brokerage business by acquiring smaller companies, analysts said.

Citigroup and Morgan Stanley are combining their retail brokerages into a joint venture controlled by Morgan Stanley, sources said.

That deal, expected to be announced this week, may be a setback for JPMorgan Chief Executive Jamie Dimon, who has said frequently that he would like to acquire a retail brokerage.

Citigroup never spoke to JPMorgan about buying Smith Barney because it would not have been a good match, a person familiar with the matter said.

Citigroup was looking for a joint-venture partner that it could merge its business with. It was hoping its joint venture partner could buy Citigroup's stake over a period of years, so that it would not have to sell the entire business in a depressed market.

JPMorgan, which has just a small brokerage from its May 2008 acquisition of Bear Stearns Cos, did not meet these requirements, the person said.

JPMorgan and Citigroup declined to comment.

There is increasing interest among banks to boost assets under management in their brokerage businesses to diversify their sources of revenue. Many analysts believe JPMorgan does not need to increase brokerage business if it does not want to.