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Tuesday, Nov. 6, 2007
Citigroup off to strong start on return to TSE
Shares of Citigroup Inc. rose by as much as ¥250, to ¥4,580, on its first day of trading on the Tokyo Stock Exchange, even as the U.S. financial giant was rocked by the resignation of Chief Executive Officer Charles Prince over widening losses stemming from housing loan debts.
Citigroup shares closed the day at ¥4,550, compared with Friday's close in New York of $37.73, or ¥4,330 at the current exchange rate.
Citigroup is the first U.S. company to be listed on the TSE since 2001, when JPMorgan Chase & Co. debuted on the Tokyo bourse.
Citigroup's listing ceremony was flooded with reporters, many of whom were eager to seize on comments from Douglas Peterson, chief executive officer of Citigroup Japan Holdings, on Prince's resignation. But Peterson remained tight-lipped, and a news conference scheduled in the afternoon was canceled.
During a ceremony Monday morning at the bourse, TSE President Atsushi Saito handed Peterson its listing certificate and congratulated him on Citigroup's listing.
It is the second time Citigroup is being listed on the TSE. The U.S. banking group first went public in 1973 as one of the first foreign entities to be listed on the Tokyo market. But it withdrew from the bourse after Citicorp merged with Travelers Group Inc. to form the current Citigroup.
"It is great to be back," Peterson said. "Our listing on the TSE is a natural next step in Citi's long-term commitment to Japan, which is an important part of our global strategy."
Peterson said the listing on the TSE is part of Citigroup's strategy of expanding its presence here. The group has also localized its banking operation in Japan and has placed Nikko Cordial Corp. under its umbrella.
One of Citigroup's purposes in listing on the TSE is to facilitate its takeover of Nikko Cordial.
Last month, Citigroup said it will acquire all shares of Nikko Cordial through a so-called triangular merger scheme. This will allow Nikko shareholders to receive ¥1,700 worth of Citigroup shares per Nikko share. But pundits have expressed concern that those Japanese shareholders will not be able to trade shares in Tokyo if Citigroup is not listed here.
In April, Citigroup acquired 61 percent of Nikko Cordial for ¥920 billion — the biggest buyout a foreign company has launched on a Japanese firm. After increasing its stake in Nikko to 68 percent in June, the U.S. bank said last month it will buy the rest of the shares. The acquisition will force Nikko to be delisted on Jan. 23.
Although Citigroup, which opened its first branch in Japan in 1902, has aggressively expanded business here over the past year, some cast doubt on whether Citigroup really is here to stay.
Yasuo Kanzaki, special adviser to Nikko Citigroup Ltd., said Citigroup's second listing will be a litmus test to see if the banking group's commitment to Japan is genuine.
"Citigroup has a criminal record" of pulling out of the market in the past, said Kanzaki before he proposed a toast at the ceremony. "If Citigroup withdraws from the market again, people will think Citigroup's commitment to Japan is not genuine."
Kanzaki's concern was echoed by some market watchers.
Minoru Hattori, an analyst at Okasan Securities, said Citigroup's financial resources allocated to the Japanese market are likely to be slashed due to its rising debt from the U.S. subprime mortgage woes.
Citigroup said its net profit for the July-September period dropped 57 percent from the same period last year to $2.38 billion due to losses from subprime loans.
"But at the same time, it is expanding business in Japan because it believes Japan is a money-making market," Hattori said. "It may be thinking of raking in money to offset the losses."