Morgan Stanley Smith Barney will shrink the number of its US branch offices this year, while expanding the number of offices overseas, according to published reports.

MSSB is on track to close around 120 US offices as it integrates Morgan Stanley and Citigroup’s Smith Barney operations around the country, Charles Johnston, the retail unit’s president, told Business Week.

At the same time, overseas growth for MSSB will expand significantly, Johnston said, speaking to reporters following his address at the Securities Industry and Financial Markets Association's private client conference in New York last week.

Sallie Krawcheck, president of Bank of America's global wealth and investment management division, has said the bank's Merrill Lynch unit is also focusing on overseas growth in rapidly developing markets such as China, Indonesia, India and Brazil.

The decision to eliminate US offices was based on overlap between Morgan Stanley and Smith Barney offices and expiring leases, according to Johnston.

MSSB’s US offices will stabilize at around 750, Johnston said, down from 958 last year and 870 at the end of the March.

MSSB currently has just over 18,000 advisors; a number Johnston said he expects to remain stable.

First quarter revenue of MSSB was $3.11 billion, down from $3.14 billion in the fourth quarter. Pretax profit margin was 9 per cent, up from 7 per cent in the fourth quarter.

In a letter to shareholders earlier this month, Morgan Stanley chief executive James Gorman said that MSSB will play “an increasingly important role in our growth and profitability.”

Morgan Stanley expects to increase pretax profit margin for MSSB to 15 per cent by the end of this year and more than 20 per cent by the end of 2011. Net new client assets in the unit were $5.8 billion, the highest since the third quarter of 2008.