Citigroup in brokerage merger talks with Morgan

NEW YORK — The original financial supermarket is dead.

Citigroup, with Tuesday’s announcement that it was merging its Smith Barney brokerage into a joint venture with Morgan Stanley, signaled the end of a decadelong experiment to create a one-stop banking center providing a full range of financial services.

The deal gives Citigroup $2.7 billion in precious cash as it struggles in the aftermath of the mortgage and credit crisis. There is speculation that Chief Executive Vikram Pandit, who for months supported Citigroup as a “universal bank,” will be taking further steps to streamline the company.

The idea behind the supermarket is that the average person can do all his saving, borrowing and investing with one company. Over the years, Citigroup cobbled its multifaceted operation together, led by Sandy Weill -- the former CEO who is both lauded for bringing Citigroup its biggest profits and criticized for creating an unsustainably massive, impossible-to-manage conglomerate.

Whether one company can provide all those services better than a number of specialized companies has been the big question since the deregulation of the banking industry in the 1990s.

“The problem with Citi is the model, the execution, the management,” said William Smith at Smith Asset Management, who owns Citigroup shares. “How do you go a decade without integrating?”

Citi’s announcement Tuesday further undermines the idea that one company can handle such diverse businesses at once.