A win for Morgan Stanley (MS) in a fight with Citigroup Inc. (C) over the value of their brokerage joint venture could show the firm is playing a losing hand.

Morgan Stanley, which has staked much of its pitch to investors on the stable earnings of its wealth-management business, is arguing that the brokerage is worth less than half what Citigroup says as it adds a 14% stake to the 51% the investment bank currently owns. Morgan Stanley's $9 billion valuation implies the joint venture's profit could shrink by as much as 12% annually over the long term, according to Goldman Sachs Group Inc. analysts.

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