Citigroup sells Japan brokerage business for $5.6B

TOKYO -- Sumitomo Mitsui Financial Group will acquire Nikko Cordial Securities and some parts of Nikko Citigroup's Japan operations for about 545 billion yen ($5.6 billion).

"It is an important step in the execution of Citigroup's strategy," Citigroup Vice Chairman Stephen Volk told reporters at a Tokyo hotel. "In executing our new strategy, we remain committed to our businesses in Japan, where we have over a century of experience."

Volk said Citigroup will lose about $200 million on the transaction compared to what it had spent to acquire Nikko Cordial a year ago. It is Japan's third-largest brokerage with managed assets of 25 billion yen ($260.4 million) and 111 branches.

The deal, intended to be completed by Oct. 1, also includes a cash transfer to Citigroup related to assets of the brokerage totaling some 201 billion yen, both sides said.

The widely expected move, which also includes the purchase of most of Nikko Citigroup's securities operations, is part of the ailing U.S. bank's global restructuring. Citigroup has said it is looking into selling its Japan brokerage operations.

The deal will make Sumitomo Mitsui the first Japanese bank to buy a top brokerage in Japan.

Two other of Japan's "megabanks" — Mitsubishi UFJ Financial Group and Mizuho Financial Group — had also been wooing Nikko Cordial. But they lost out in the end.

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.

Sumitomo Mitsui President Teisuke Kitayama said the huge amount of individual savings in Japan provides an attractive market for financial products and needs for individual investments are growing.