The stress of facing a perilous threat triggers a fight or flight response. Last autumn, Morgan Stanley and Goldman Sachs fought while Merrill Lynch fled into the arms of Bank of America. Lehman Brothers, of course, succumbed. Should that threat persist, noted endocrinologist Hans Selye, one must adapt to cope in the longer term. US banks are now involved in that arduous process. Citigroup, however, close to agreeing a retail brokerage deal with Morgan Stanley, is still merely battling. Persistent rumours surrounding chairman Sir Win Bischoff and doubts about chief executive Vikram Pandit’s leadership suggest top-level stability remains distant. A 49 per cent stake in a larger, more profitable brokerage unit sounds strategically appealing. But Morgan Stanley would have the option to reduce Citi’s holding, potentially just as the combination overcomes the worst of the integration and economic downturn. Upfront cash and a capital gain – plus regulatory pressure – are more plausible motivators for a deal.

Morgan Stanley is increasing its retail exposure as those investors turn their backs on equities. But spreading the substantial costs of technology and nationwide offices over a bigger operation by customer funds boosts brokerage profitability – and both partners fall short of Merrill’s 20 per cent-plus pre-tax margins. But keeping touchy sales teams happy is crucial when crunching together 23,000 advisers. BofA, at least, should be pleased. With so many other retail brokers in upheaval, its challenge (a velvet glove integration of Merrill’s leading franchise) looks relatively straightforward. Morgan Stanley’s shift towards retail – which normally lags behind professional investment in an upturn – contrasts with Goldman’s approach of simply toning down risk until markets improve. Citi, under duress, is slimming down as JPMorgan and BofA bulk up. Uncertainty as to the length and depth of the slump compounds such differences. Regardless, resisting the pressures of a newly stressful environment is draining. Someone, eventually, burns out.