Sumitomo Mitsui Financial Group and Citigroup said Friday that they have reached an agreement in which SMFG will acquire most of Citigroup's Japanese brokerage operations effective October 1st. SMFG will buy retail brokerage Nikko Cordial Securities and some operations of wholesale investment bank Nikko Citigroup for about $5.6 billion. SMFG also said it has agreed with Citi to form an alliance in corporate and investment banking, including mergers & acquisitions, sales, and trading services.
While SMFG already has wholesale investment banking operation Daiwa Securities SMBC, it is a bit of surprise that this Nikko deal included not only Nikko Cordial but also Nikko Citi. SMFG reportedly intends to consolidate the two Nikko operations.
When Citi announced its intention to sell its subsidiary this January, most of the industry thought Nikko Cordial's destination would be its "old home" Mitsubishi. Now Citi's forced sale seems to have triggered a large industry shake-up with a possible future merger between Daiwa and Nikko. This merger is what the No.1 brokerage house Nomura is most afraid of.
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