strategy announced in January that would separate Citigroup’s main banking business from its other assets

TO BE NOTED: From the NY Times:

"Citi Will Sell Japan Units, Bolstering Its Capital

By HIROKO TABUCHI

TOKYO — Citigroup said on Friday that it would sell its Japanese brokerage and investment banking units for $5.56 billion, securing much-needed capital before results expected next week from a government “stress test” of its financial health.

Citigroup, the recipient of about $45 billion in bailout money, will sell its Japanese securities arm and parts of its investment banking business to Sumitomo Mitsui Financial Group.

The overall transaction, including shareholdings and retained debt payments, is valued at 774.5 billion yen ($7.8 billion), Citigroup and Sumitomo Mitsui said. Citigroup said it would realize a loss of $200 million on the transaction, which would generate $2.5 billion in tangible common equity, a measure of financial health.

Citigroup’s sale of important businesses in Japan would reverse an ambitious, yet short-lived, push into the country. Just two years ago, the bank, based in New York, had spent about 1.6 trillion yen to acquire the Nikko Cordial franchise.

But Citigroup has been scrambling to raise capital after a year of crippling losses that has led to three bailouts, the last of which gave the government a 36 percent stake in the bank.

Vikram S. Pandit, Citigroup’s chief executive, called the sale “another step in the execution” of a strategy announced in January that would separate Citigroup’s main banking business from its other assets.

Citigroup’s sale in Japan includes Nikko Cordial Securities, a large brokerage firm, and parts of Nikko Citigroup, the investment banking unit of Citigroup in Japan.

The transaction does not include Nikko Asset Management, which is expected to be sold separately. The sale also leaves out Citigroup’s consumer banking and credit card assets in Japan, which Citigroup says it will keep.

The deal comes as United States regulators prepare to disclose results of the stress tests, which are assessing the banks’ ability to withstand a further deterioration in the economy.

With its purchase, Sumitomo Mitsui hopes to close the gap with the top brokerage house in Japan, Nomura Holdings. Nomura bought some of the operations of the failed investment bank, Lehman Brothers, last year.

Sumitomo Mitsui invested $745 million in the British bank Barclays last year and has had capital ties with Goldman Sachs since 1986. The Japanese bank said Friday that it would also work with Citigroup in the securities brokerage, sales and trading businesses.

Japanese banks have been looking to expand globally and increase fee revenue amid sluggish corporate activity at home. But losses on recent investments, as well as mounting bad loans and write-downs in the value of shareholdings, have battered their balance sheets.

On Friday, the biggest bank in Japan, Mitsubishi UFJ, said it expected to swing to a 260 billion yen loss for the year ending next March, compared with a previous forecast of a 50 billion yen profit. Mitsubishi UFJ, which invested $9 billion in Morgan Stanley last year, said its equities losses were likely to come to 520 billion yen.

Sumitomo Mitsui booked a loss of 390 billion yen in the year ended March 31. The bank said it was assessing the effects of the Citigroup deal on its finances."

spent 1.5 trillion yen ($14.96 billion) to acquire the franchise, so selling the assets at a little more than half that could result in a capital hit

TO BE NOTED: From Reuters:

"Citigroup may sell more Japan operations

Mon Apr 13, 2009 3:11pm EDT

By Taro Fuse and Emi Emoto

TOKYO (Reuters) - Citigroup Inc has told potential buyers of its Japanese retail brokerage arm that it may also be willing to sell its Japanese investment banking and asset management operations, sources familiar with the matter said.

While a sale would raise cash, Citigroup's capital level could suffer if the bank were forced to sell assets at too low a price, a big negative for a company reeling from more than $85 billion of writedowns and credit costs since mid-2007.

Citigroup put retail brokerage Nikko Cordial Securities up for sale in February. The bank may also sell all or part of its Nikko Citigroup investment banking and Nikko Asset Management fund management units, along with the retail brokerage, the sources said.

Jon Diat, a spokesman for Citigroup in New York, declined to comment.

Japan's Kyodo News, citing banking sources, reported earlier that the three Nikko businesses combined could be priced at 800 billion yen ($7.98 billion).

Citigroup spent 1.5 trillion yen ($14.96 billion) to acquire the franchise, so selling the assets at a little more than half that could result in a capital hit.

The sources, who requested anonymity because they were not authorized to speak publicly about the matter, said Citigroup hoped to fetch a higher price by selling the units together.

In February, Citigroup's efforts to sell Nikko Cordial drew interest from Japan's top three banks: Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group. Nikko Cordial has about 110 branches across Japan.

Now, Citigroup is wondering if adding additional assets to that sale would bolster demand. "Nikko Cordial on its own may only sell for about 400 billion yen," an executive at a Japanese bank told Reuters.

Citigroup shares were up 55 cents, or 18 percent, at $3.59 in Monday afternoon trade on the New York Stock Exchange.

SEEKING BIDS

Citigroup plans to seek bids for its Japanese investment banking operations on April 20, the sources said. It may opt to sell just part of Nikko Citigroup, they said.

The government has propped up Citigroup three times since October, and the bank has taken more than $45 billion of taxpayer money. The government is expected to become Citigroup's largest investor, with a potential 36 percent stake.

Citigroup has divided its assets into Citicorp, which houses the businesses it considers its main operations, and Citi Holdings, which includes units and assets it is looking to shed, including Nikko Cordial and Nikko Asset Management.

Until recently, the bank viewed Nikko Citigroup as a major unit that it intended to hold onto.

Nikko Citigroup is struggling amid the market downturn and a dearth of investment banking deals. Its net loss doubled to 14.5 billion yen for the nine months to end-December.

($1 = 100.238 yen)

(Reporting by Taro Fuse and Emi Emoto, editing by Matthew Lewis and John Wallace)"