UPDATE 1-MUFG to delay purchase of Citi's Japan trust bank

* MUFG unit to delay Citi Japan trust bank purchase

* Aims to complete the deal by December

TOKYO, March 26 (Reuters) - Mitsubishi UFJ Trust & Banking, the trust banking unit of Mitsubishi UFJ Financial Group (8306.T), said on Thursday it would delay its planned $255 million acquisition of Citigroup's (C.N) Japanese trust bank.

Mitsubishi UFJ said in December it would buy NikkoCiti Trust & Banking for about 25 billion yen. Citigroup has been selling assets worldwide in the face of mounting loan losses and sagging economies worldwide. [ID:nT290822]

The companies had planned to complete the deal by April 1 but they now aim to finalise it by the end of December.

The Mainichi newspaper reported on Wednesday that Mitsubishi UFJ had decided to put off the acquisition as NikkoCiti Trust may have to shoulder some costs owed by failed lender SFCG, which has said it has given up efforts to revive its business and will close down.

NikkoCiti Trust has exposure of several tens of billions of yen to the lender's loans to its borrowers, the paper said.

Officials for Mitsubishi UFJ and NikkoCiti declined to provide further details including the reason for the delay. (Reporting by Sachi Izumi and Taiga Uranaka; Editing by Chris Gallagher)