Sumitomo Mitsui is taking over Citigroup’s Japan brokerage businesses, both sides said yesterday, as part of a bigger plan to restructure the struggling US bank.
Sumitomo Mitsui Financial Group Inc will acquire Nikko Cordial Securities Inc and some parts of Nikko Citigroup’s Japan operations for about ¥545 billion (US$5.6 billion), company officials said.
Details were to be announced by executives at a news conference at a Tokyo hotel later in the day, they said. The deal, to be completed between October and December this year, also includes a cash transfer related to assets of the brokerage totaling some ¥21 billion, they said.
The expected move, which also includes the purchase of most of Nikko Citigroup’s securities operations, is part of the ailing US bank’s global restructuring. Citigroup has said it is looking into selling its Japan brokerage operations.
The deal makes Sumitomo Mitsui the first Japanese bank to buy a top brokerage in Japan.
Two other local “megabanks” — Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc — had wooed Nikko Cordial.
Nikko Cordial, which Citigroup acquired a year ago, is Japan’s third-largest brokerage, boasting managed assets of ¥25 billion and 111 branches.
Sumitomo Mitsui can hope to expand its brokerage operations by acquiring Nikko Cordial, which operates in both individual and corporate sectors in Japan. The acquisition will allow Sumitomo Mitsui to come close in size to the nation’s industry leader, Nomura Holdings.
The acquisition will not include some operations in Nikko Citigroup’s securities business, Nikko Asset Management and other units, it said, and is an effort to better streamline the efficiency of Citigroup’s overall business.
After reporting a quarterly loss of US$8.29 billion, Citigroup last month reorganized into two entities, Citicorp and Citi Holdings. The first is focused on traditional banking around the world, while the second holds the company’s riskier assets and tougher-to-manage non-core ventures, including Nikko Cordial.
Analysts have said that CEO Vikram Pandit’s reorganization allows Citigroup to sell or spin off the Citi Holdings assets to raise cash.
Citigroup has already begun scaling back its presence in Japan to cope with the global financial crisis. In December, it agreed to sell NikkoCiti Trust and Banking Corp to Mitsubishi UFJ Trust and Banking Corp in an all-cash deal worth ¥25 billion.
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