Citigroup is to reap a much-needed capital gain of up to $6bn, as well as a cash payment of $2.7bn if it clinches a deal to spin off its brokerage unit into a joint venture controlled by Morgan Stanley, people close to the situation said.

The decision to cede control of Smith Barney in exchange for cash and a sizeable capital gain underlines Citi’s need to bolster its balance sheet.