Uncertainty Looming over Fate of Citi's Japan Operations

Tokyo, Jan. 14 (Jiji Press)--Uncertainty is looming over the fate
of the Japanese operations of Citigroup Inc. as the struggling U.S.
financial giant just announced an effective divestment of its Smith Barney
retail brokerage network.

The focus is Tokyo-based retail brokerage firm Nikko Cordial
Securities Inc., which plays a key role in Citi's Japan strategy.
On Tuesday, Citi and Morgan Stanley said they have agreed to set up
a joint venture to integrate their brokerage operations. Morgan Stanley will
take a controlling stake in the new firm, to which Smith Barney will be
transferred.
The joint venture will not include Nikko Cordial Securities.
Citi last year acquired the Nikko Cordial group for about one
trillion yen. Nikko Cordial Corp., the governing body for the Japanese
group, was transformed into Nikko Citi Holdings Inc. in May.
Last month, Nikko Citi President Douglas Peterson denied sale of
Nikko Cordial Securities, saying that Citi's strength lies in its ability to
offer a broad range of financial services including banking, brokerage and
asset management.
But the U.S. parent has put off a merger between Nikko Cordial
Securities and Tokyo-based wholesale brokerage arm Nikko Citigroup Ltd.,
originally slated for March this year.
In addition, Citi has announced a plan to sell NikkoCiti Trust and
Banking Corp. to Mitsubishi UFJ Trust and Banking Corp. At Nikko Cordial
Securities, deep job cuts are underway.
Citi, receiving extensive U.S. government support, is believed to
face strong pressure to restructure. Citi has decided to divest itself of
Smith Barney despite earlier comments denying such a move.
The Smith Barney deal may signal a change in Citi's strategy to
provide a comprehensive package of financial services. A Japanese industry
executive said Citi could also sell Nikko Cordial Securities.
Such a move could even develop into broader realignments in the
Japanese brokerage and banking industries.