Sumitomo closes in on Nikko Cordial

TOKYO: Citigroup Inc, the recipient of $45 billion in US government rescue funds, plans to sell its Japanese brokerage units to Sumitomo Mitsui Financial Group Inc for more than 500 billion yen ($5.2 billion), said two people with knowledge of the negotiations.

Sumitomo Mitsui, Japan���s second-largest bank by market value, will buy Nikko Cordial Securities Inc and part of Nikko Citigroup, the investment banking unit of Citigroup in Japan, said the people, who declined to be identified. Citigroup spokeswoman Atsuko Yoshitsugu in Tokyo declined to comment.

New York-based Citigroup, whose five straight quarterly losses ended in the first quarter, is selling units it deems non-essential to raise capital after the US government agreed to take a 36% stake. The bank posted a $1.6 billion profit for the first quarter on trading gains and an accounting benefit for companies in distress.

In Japan, Citigroup is shifting its resources to retail banking and investment banking from the brokerage business. The acquisition of Nikko, Japan���s third-largest brokerage, means Sumitomo Mitsui will be able to tap 66 trillion yen of individuals��� assets and 302 branches throughout Japan.

Nomura Holdings Inc, Japan���s largest brokerage, had 59 trillion yen of retail assets and 172 branches as of March 31. Citigroup selected Sumitomo Mitsui as the preferred buyer for Nikko Cordial after the Japanese lender outbid rivals, two people who declined to be identified because the negotiations are confidential said on April 25.

Sumitomo Mitsui operates a retail brokerage with 75 branches nationwide. Sumitomo Mitsui has a close business relationship with Daiwa Securities Group Inc, Japan���s second- largest brokerage. Nikko Cordial, formed in 1944, had 133.6 billion yen revenue for the nine months ended December 31.