Citigroup falls on report of loss

The sign for a Citibank bank branch and a street sign are seen in Cambridge, Massachusetts November 24, 2008.

NEW YORK (Reuters) - Citigroup Inc (C.N) shares fell more than 10 percent on Monday to their lowest level in nearly seven weeks after news that the bank might report a quarterly operating loss of at least $10 billion, as it considers combining its brokerage with that of Morgan Stanley (MS.N).

Citing people familiar with the matter, The Wall Street Journal said the size of the quarterly loss could change. It excludes an estimated $4 billion gain from the recent sale of the bank's German retail banking business.

Citigroup declined to comment. A $10 billion loss would cause Citigroup's full-year operating loss to be well in excess of $20 billion. The third-largest U.S. bank by assets is expected to report its quarterly results on Jan 22.

The transaction combining Citigroup's Smith Barney brokerage with Morgan Stanley's brokerage would result in a joint venture run by Morgan Stanley. That bank would likely pay $2.5 billion in cash in exchange for a 51 percent stake in the venture, a person familiar with the matter said on Monday.

A pact is likely the middle of the week, the person said.

In late morning trading, Citigroup shares were down 70 cents, or 10.4 percent, to $6.05 on the New York Stock Exchange. They traded as low as $5.75 on November 25, Reuters data show.

(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)