Archive

Citigroup closes $8.7B sale of Japanese brokerage

Citigroup Inc. has completed the sale of its Japanese brokerage to Sumitomo Mitsui Banking Corp. in a $8.7 billion deal that advances the U.S. bank's efforts to restructure after big losses on risky investments.

Citigroup Inc. has completed the sale of its Japanese brokerage to Sumitomo Mitsui Banking Corp. in a $8.7 billion deal that advances the U.S. bank’s efforts to restructure after big losses on risky investments.

The cash and debt transaction, valued at 776 billion yen ($8.7 billion), involves 7,800 employees through the sale of Nikko Securities Inc. and parts of Nikko Citigroup’s Japan operations. The new entity is named Nikko Cordial Securities Inc.

Citigroup, which received billions in taxpayer funds to survive the financial crisis, said it will book an immaterial after-tax gain on the deal in the fourth quarter. The sale was first announced in May.

Sumitomo Mitsui is the first Japanese bank to buy a top brokerage in Japan — marking a major realignment in the country’s financial sector.

At a ceremony held Thursday in Tokyo, Sumitomo Mitsui Banking’s Corp. President Masayuki Oku said he hopes the new entity becomes a “model for integration of banking and brokerage businesses,” according to Kyodo news agency.

The Nikko Cordial sale was one of three Japan deals that Citigroup closed Thursday to quickly condense Citi Holdings, a unit that includes non-core assets.

It also sold its entire 64 percent stake in Nikko Asset Management to Sumitomo Trust & Banking Co. in an $844 million deal. Nomura Trust & Banking Co., a unit of Japanese brokerage giant Nomura Holdings Inc., bought NikkoCiti Trust and Banking Corp. for $212 million.

Citigroup also said it signed a strategic alliance agreement with parent Sumitomo Mitsui Financial Group Inc.

“The main focus of the alliance is to build upon the long-standing relationship between Citigroup Global Markets Japan and Nikko Securities,” Citigroup said in a statement.

Among the banks hardest hit by the credit crisis and recession, Citigroup has aggressively shifted its operations to focus more on traditional banking. At the beginning of the year, Citi split into two divisions, Citicorp and Citi Holdings, to separate its traditional banking businesses from riskier operations that were the primary reason for its struggles.

Citigroup has received $45 billion in government bailout money and guarantees to protect it against losses on more than $300 billion in soured investments. The government recently exchanged a majority of that bailout money for a stake in the New York-based bank.

Citigroup still operates the largest foreign-owned retail banking operation in Japan. It also provides investment and corporate banking services and a premium credit card business for customers in the country.