Citi to sell Japanese unit to raise funds

Citigroup IncAs part of its global move to raise the much-needed funds through asset disposals and restructuring measures, the struggling Citigroup Inc plans to sell NikkoCiti Trust and Banking Corp, its trust bank unit in Japan, for an expected 40 billion yen, that is, $420 million.

In fact, the Nikkei business daily, without citing any sources, said that an auction could be held as early as Monday.

Citigroup acquired 50 per cent of the former Nikko Trust and Banking Corporation from Nikko Securities in 2001. This year, Citigroup acquired Nikko Cordial, Japan's third-largest broker, in a 1,000-billion yen deal. At the time, Citigroup desired to expand in Japan, saying it would double the number of retail bank outlets and triple its corporate banking business over the next few years.

However, the US bank has since been forced to scale down its ambitions. It has suffered losses on its exposure to subprime mortgages and other complex debt products and seen its share price plunge. Last week, it received $27 billion from the US government on top of a previous capital injection of $25 billion, and faces intense pressure to cut costs.

In October, Citigroup sold its investment business, Nikko Antfactory, to a group led by Norinchukin Bank, Japan's bank for agricultural co-operatives.

NikkoCiti Trust and Banking is a relatively small business - according to its website, it had 136 employees and 20 billion yen in capital as of September 30. The business is likely to be of interest to other major Japanese trust banks - such as Mitsubishi UFJ Trust and Banking Corp, Sumitomo Trust & Banking Co Ltd, and Mizuho Trust & Banking Co Ltd - who would make bids for the Citigroup unit aiming to expand their client bases.