VOL. 124 | NO. 149 | Friday, July 31, 2009
Citigroup Sells Stake in Japanese Asset Manager
BY STEPHEN BERNARD | AP Business Writer
NEW YORK (AP) - Citigroup Inc. said Thursday it is selling its entire majority stake in a Japanese asset management company to The Sumitomo Trust and Banking Co Ltd. for about $795 million.
The bank is selling its 64 percent stake in Nikko Asset Management for 75.6 billion yen as part of its ongoing plan to reduce its holdings in Japan, and amid an overhaul of its worldwide operations.
Among the hardest hit banks by the credit crisis and ongoing recession, Citigroup has been radically altering its operations to focus more on its traditional banking operations, such as retail banking. At the beginning of the year, Citi split its operations into two divisions, Citicorp and Citi Holdings in an effort to separate its traditional banking businesses form its riskier and noncore operations that have been the primary reason for its ongoing struggles.
Alex Samuelson, a spokesman for Citigroup in New York, said the divestiture of certain Japanese operations "is really a snapshot of the Citicorp, Citi Holdings strategy."
Citi has been selling off assets and reducing its holdings in noncore operations in recent months, which have included parts of its Japanese operations.
Citi CEO Vikram Pandit said in a statement the bank remains committed to its remaining Japanese operations.
"We can now shift our focus from reshaping our franchise in this very important market to building our core businesses and better serving clients," Pandit said.
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.
The sale of Nikko Asset Management is expected to close in the fourth quarter.
In early July, Citigroup agreed to sell its Japanese trust bank, NikkoCiti Trust and Banking Corp., to Nomura Trust and Banking Co. for 19 billion yen ($200.7 million). In May, Japan's No. 3 bank Sumitomo Mitsui Financial Group agreed to acquire Citigroup's Japan brokerage businesses, Nikko Cordial Securities Inc. and some parts of Nikko Citigroup's Japan operations for about 545 billion yen ($5.76 billion).
The additional capital from the Japanese sales will help protect Citigroup against potential future losses as it grapples with mounting loan losses like nearly all other banks have been facing over the past two years.
Aside from asset sales, the New York-based bank has also received $45 billion in government aid and a backstop protecting it against hundreds of billions of dollars on potential losses from risky investments.
Last week, Citigroup completed an exchange of $58 billion in debt, including $25 billion from the government aid package. The exchange will give the government a 34 percent stake in the banking giant.
The exchange program provides Citi a better mix of capital to withstand additional loan losses and further weakening in the economy. By turning preferred shares into common stock, Citi also no longer has to pay out dividends on the preferred shares, thus helping improve its cash flow.
Despite the ongoing struggles, earlier this month Citi reported a $3 billion second-quarter profit instead of the big loss analysts expected. The profit was mostly tied to a gain on the sale of a majority stake in its Smith Barney retail brokerage unit to Morgan Stanley.
AP Business Writer Mae Anderson in New York contributed to this report.
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