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CITADEL, BOFA IN BROKERAGE SALE TALKS

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Published Dec. 20, 2007, 10:00 a.m. ET

In another sign that Bank of America chief Ken Lewis is intent on getting out of the investment-banking business, the Wall Street giant is in discussions to sell its prime brokerage unit to hedge fund giant Citadel, according to sources familiar with the matter.

Citadel, which recently snapped up a large stake in online retail broker E*Trade, has recently inspected the books of BofA’s prime brokerage business, according to one individual. It’s unclear if a deal can be reached and sources noted that the operation is not being widely shopped.

A spokeswoman for the bank declined to comment.

Senior executives at the BofA unit, which provides a number of services to hedge fund clients, have been fleeing in droves over the past two months. Christopher Pesce, the head of the unit, recently left the firm and Steven Winter, who was in charge of the fixed-income side of prime brokerage, has also departed, sources said.

BofA’s prime brokerage woes are a microcosm of management’s decision to gradually shed both employees and business lines in its once high-flying investment bank. Sources said the bank is also looking to sell its public financing unit, which provides lending for city, state and local government projects.

In October, Lewis made a point to note that the investment bank would be scaling back operations amid sharp earnings declines and mounting mortgage-related write-downs. He noted archly: “I’ve had all the fun I can stand in investment banking.”

Other recent departures have included Michael Meyer, head of investment-grade bond trading; Eugene Taylor, a commercial-banking veteran who had been put in charge of the corporate- and investment-banking unit; Gene Taylor, president of corporate and investment banking; and Peter Forlenza, global co-head of equities.

The prime brokerage unit, according to insiders, recorded about $310 million in net revenues last year and had roughly $20 million in operating income.

A spokeswoman for Citadel did not return calls for comment. zachery.kouwe@nypost.com