New York  - US bank Citigroup is to merge its brokerage unit, Smith Barney, with rival Morgan Stanley, the two firms said in New York on Tuesday.

Morgan Stanley will lead the new brokerage and will pay Citigroup 2.7 billion dollars in cash.

Citigroup has been hard hit by the financial crisis and has cut thousands of jobs, while its losses for the fiscal year could rise to more than 20 billion dollars when it announces quarterly numbers next week. It has received two cash infusions totalling 45 billion dollars from the government.

The combined brokerage would be the largest of its kind worldwide, with 20,000 brokers and financial advisors and 1.7 trillion dollars in client assets. (dpa)