* Citi may sell Japan investment bank and broker - media
* But Nikko Citigroup too vital to sell - source
* Bundled sale could raise hundreds of billions of yen
(Updates with details, analyst comments)
By Junko Fujita
TOKYO, Feb 25 Citigroup Inc (C.N) may sell both
its Japanese investment bank and brokerage, according to media
reports, as the faltering U.S. lender looks to raise more cash
from a sale of global assets.
The two units could bring in hundreds of billions of yen if
sold together, Jiji Press and the Sankei newspaper said on
Wednesday. Nikko Cordial, the retail brokerage, may alone raise
up to 300 billion yen ($3.1 billion), sources with knowledge of
the matter have said. [ID:nT127749]
However, one person familiar with Citigroup's strategy said
selling Nikko Citigroup, the investment banking unit, was not
part of Citi's plans as it was vital to the group's presence in
the world's second-biggest economy.
Citigroup is looking to sell assets around the world to
raise cash and is in talks with U.S. regulators for the
government to increase its stake in the bank, a source has told
Reuters, underscoring the severity of its plight in the grip of
a global financial crisis. [ID:nN23336737]
Nikko Cordial Securities, a brokerage with about 110
branches across Japan, was put up for sale this month, drawing
interest from the country's top three banks -- Mitsubishi UFJ
Financial Group (8306.T), Mizuho Financial Group (8411.T) and
Sumitomo Mitsui Financial Group (8316.T).
Citigroup did not originally plan to sell Nikko Citigroup,
dubbing it a "core unit" when the third-largest U.S. bank by
assets announced reorganisation plans last month.
But it may now look to bundle the two units as this could
allow a buyer to benefit from cooperation between the retail
brokerage and investment banking operations, and push up the
price, according to reports by the Mainichi and Sankei
newspapers and Jiji Press on Wednesday.
A spokeswoman for Citigroup in Japan declined to comment.
The source with knowledge of Citigroup's strategy for Japan
said it would not make sense to sell Nikko Citigroup.
"Investment banking business is an important part of the
Japanese operation for Citigroup," said the person, asking not
to be named as information is not public. "The sale of Nikko
Citigroup is not possible."
It was also unclear whether Japan's top banks would want to
pay more for such a deal, given their capital is being eroded
by a tumbling stock market and rising bad loan costs.
Buying both units could also complicate a deal, one analyst
"In a market like this, to acquire such a big broker,
retail plus wholesale, means they would have to pay a lot more
than just on the face of it as they'd need a lot of
restructuring, integration," said Kristine Li, banking analyst
at KBC Securities in Tokyo.
Nikko Citigroup is also struggling amid the market downturn
and a dearth of investment banking deals. Its net loss doubled
to 14.5 billion yen for the nine months to end-December. Nikko
Cordial also swung to a net loss.
Nikko Citigroup fell to 12th in the league table for
advisers on Japanese companies' mergers and acquisitions last
year, from 2nd in 2007, according to Thomson Reuters. It ranked
third as underwriter for equity and equity-linked products for
Japanese companies in 2008.
Nikko Citigroup employed 1,478 people as of March 2008, the
latest figure available.
Citigroup also plans to sell Nikko Asset Management for
around 100 billion yen, the Kyodo news agency reported earlier
this month, citing Mitsubishi UFJ as front-runner.
A person familiar with Citigroup's talks with U.S.
regulators said that converting $45 billion of preferred stock,
which the government obtained last autumn, to common stock is
one of many options. [ID:nN23336737]
The Wall Street Journal this week reported the U.S.
government may end up with as much as a 40 percent common
equity stake in Citigroup, though bank executives hope to limit
the stake to about 25 percent.
(Additional reporting by Nathan Layne, Taiga Uranaka, Mariko
Katsumura and Sachi Izumi; Editing by Edwina Gibbs & Ian