Citigroup Inc, the world's biggest bank, is losing investment-banking business in Japan after the top two executives at partner Nikko Cordial Corp resigned over charges of falsified earnings statements.
"Citigroup is concerned about the impact," Junichi Arimura said in Tokyo on Monday after announcing he would step down as president of Nikko Cordial. "Some underwriting assignments have been affected. I'll phone New York myself to explain, but I don't think our partnership will change."
Nikko's woes are the latest regulatory blow to Citigroup's strategy in Japan. Chief executive Charles Prince visited Tokyo in October 2004 to apologize after the firm had to close its private-banking business due to rules breaches, and its investment-banking venture with Nikko was slapped with a 20-day trading ban in 2003 over violations.
"It's unfortunate; Citi got caught in the crossfire," said Hisakazu Amano, who helps manage the equivalent of US$16 billion including shares in Nikko Cordial at T&D Asset Management Co in Tokyo. "There may be ramifications for both its broking business and investment banking, as well as harm to its reputation."
Citigroup has not received significant negative impact apart from its investment banking business, said Mika Nemoto, a spokeswoman at Citigroup in Tokyo. She declined to comment on Arimura's phone call to the bank's New York office.
Masashi Kaneko, who negotiated the deal that formed Nikko Citigroup Ltd, stepped down as chairman of both the investment bank and Nikko Cordial. Yuji Shirakawa, a former chairman and senior adviser, will replace Kaneko, the bank said in a statement on its Web site.
Citigroup owns 49 percent of the investment bank, which posted ¥19.6 billion (US$165 million) net income for the year ended March 31, and a 4.9 percent stake in Nikko Cordial, Japan's third-largest securities firm.
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