TOKYO — Sumitomo Mitsui is taking over Citigroup’s Japan brokerage businesses, both sides said Friday, as part of a bigger plan to restructure the struggling U.S. bank. The deal is Japan’s first acquisition of a leading brokerage by a bank.
Sumitomo Mitsui Financial Group Inc. will acquire Nikko Cordial Securities Inc. and some parts of Nikko Citigroup’s Japan operations for about $5.6 billion.
“It is an important step in the execution of Citigroup’s strategy,” Citigroup Inc. 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 with what it had spent to acquire Nikko Cordial a year ago. It is Japan’s third-largest brokerage with managed assets of $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, 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 Inc. and Mizuho Financial Group Inc. — had also been wooing Nikko Cordial.
Sumitomo Mitsui can hope to expand its brokerage operations by acquiring Nikko Cordial, which operates in 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.
“This deal marks a turning point in creating a new financial business model,” he said.
Sumitomo Mitsui can also hope to gain some of Citi’s expertise in global financing through the deal and will also maintain a partnership between Citigroup and Nikko Cordial.
The acquisition will not include some operations in Nikko Citigroup’s securities business, Nikko Asset Management and other units, it said.
