Citigroup Inc., the recipient of three U.S. government bailouts, has abandoned plans to open new branches in Japan as it seeks to trim costs, two knowledgeable sources said.
The company, which closed two branches of its Nikko Cordial Securities Inc. brokerage arm last week, canceled plans to build at least three more, the sources said, declining to be identified because no official announcement has been made. Citigroup may also consider finding partners for its local brokerage and asset management units or selling them in a public share sale, they said.
Citigroup in January put Nikko Cordial on a list of businesses flagged for eventual sale, a year after buying the brokerage for about ¥1.6 trillion.
The U.S. government, which has channeled $45 billion into Citigroup, agreed to a third rescue Friday that will cut existing shareholders' stakes by 74 percent.
"This change of course, at a time when rivals are strengthening retail networks and collaboration with brokerages, illustrates the difficult circumstances Citigroup faces under government supervision," said Toyoki Sameshima, a Tokyo-based analyst at Goldman Sachs Group Inc.
Citigroup intends to keep ties with Nikko Cordial regardless of whether the unit is sold, the two sources said, citing an internal memo sent by Douglas Peterson, CEO for Japan, to employees on Wednesday. The bank's Tokyo-based spokeswoman, Atsuko Yoshitsugu, declined comment.
Nikko Cordial and Nikko Asset Management Co. were central to Citigroup's push to offer comprehensive financial services in Japan. Citigroup first bought into Nikko in 2007, before the global credit crisis led to five straight quarterly losses and pushed the New York-based bank into retreat.