Citigroup sells stake in Nikko Asset Management to The Sumitomo Trust

Citigroup Inc. revealed its plans to sell its entire majority stake in a Japanese asset management company, Nikko Asset Management, to The Sumitomo Trust and Banking Co Ltd.The stake would be sold for a whopping $795 million. Citibank, that has 64 per cent stake in Nikko Asset Management, wants to sell the stake to reduce its holding in Japan and concentrate on the US banks that have been hit by the economic crisis.

Citigroup too has been hit hard by the recession and now aims to focus more on retail banking. Earlier in 2009, Citibank split its operations into two parts, Citicorp and Citi Holdings in order to deal with its traditional banking operations and noncore operations separately. This however did not work out well for the bank and it has witnessed a heavy decline ever since.

This is not the first time Citibank has sold its assets. In July 2009, Citigroup revealed its plans to sell its Japanese trust bank, NikkoCiti Trust and Banking Corp., to Nomura Trust and Banking Co. In May 2009, Sumitomo Mitsui Financial Group agreed to acquire

Citigroup’s Japan brokerage businesses, Nikko Cordial Securities Inc. for 545 billion yen ($5.76 billion).  The company has now decided to reduce its holdings in the riskier operations that it started under the Citi Holdings, that have apparently led to losses for the bank.

Richard Staite, a banking analyst at Atlantic Equities LLP in London talked about the Citibank’s efforts to get back on track, “The faster they can sell off their non-core assets and focus on core banking operations, the better,” he said. “Many investors see Citigroup as being too big and too diverse. They want to see the bank focus on core banking operations.” He further added.

Earlier, Citigroup failed to implement controls against money laundering which resulted in suspension of banking services from July 15 to Aug 14, 2009, by Japan’s financial regulator. Citigroup Chief Executive Officer Vikram Pandit, was quoted as saying, said that they were trying to cope with the tough conditions in a nice way and are moving “extremely fast.”

“We created and set targets for Citi in terms of asset reductions, in terms of risk reduction, in terms of cost reduction, and we have met every target and we met them on time, as well,” he said.

However, Pandit expects the bank to come back on track real fast and explained that it looks to capture the markets in countries like India and China.“We are one of the largest players in the emerging markets, and these are markets that are likely to grow pretty well over the next so many years,” Pandit said.

Citigroup finished an exchange of $58 billion in debt in end-July 2009. This includes the much hyped $25 billion from the government aid package. The good news is that in spite of the troubles the New York based bank is facing, it managed to encounter second-quarter profit of $3 billion.