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Saturday, May 2, 2009
SMFG to buy Nikko Cordial
Sumitomo Mitsui Financial Group Inc. has agreed to buy Nikko Cordial Securities Inc. and part of Nikko Citigroup Ltd. from troubled U.S. financial giant Citigroup Inc. for ¥545 billion, the two sides reported Friday.
The purchase of the brokerage operations is seen as a move by SMFG to close the gap on industry leader Nomura Holdings Inc.
Industry experts noted SMFG is the first Japanese bank to buy a major brokerage.
Experts also said it remains to seen what impact the move will have on Daiwa Securities Group Inc., another major brokerage with reportedly close relations with SMFG.
"SMFG decided at this time to welcome Nikko, one of three major brokerages," SMFG said in a statement.
"By integrating the high-quality customer services of Nikko with the stability and sense of security that the commercial bank possesses, we wish to jointly create new complex financial businesses and further strengthen our growth," it said.
The transaction is scheduled to take effect Oct. 1, the firms said.
Earlier, Citigroup reportedly granted SMFG preferential negotiating rights for Nikko Cordial as SMFG outbid the country's two other major banking groups, Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc.
SMFG's retail brokerage maintains 75 branches nationwide, while Nikko Cordial operates more than 100 branches with client assets in excess of ¥20 trillion.
Till now, a clear line has divided megabanks and major brokerages in Japan, said an industry analyst who declined to be named. Thus, SMFG's acquisition of Nikko is unprecedented, he stressed.
Having a major brokerage under its wing should benefit SMFG, he added.
The focus is now on whether Nikko and Daiwa, both major brokerages, will join hands under SMFG. "The question is how to deal with Daiwa . . . though it is saying it wants to have a sound relationship" with SMFG, he said.
Commenting on the possibility that Nikko and Daiwa might merge under SMFG, the analyst suggested the brokerages would prefer a looser alliance.