Raw Japan

Slices of Japanese business, politics and life

$15 billion later, Citigroup still couldn’t turn Japanese

By David Dolan
January 20, 2009

The likely sale of Citigroup’s Japanese brokerage, Nikko Cordial Securities, is a potential game-changer for Tokyo finance. It also illustrates the swift collapse of the firm’s ambitious Japan strategy.

Citigroup (C.N), which on Friday unveiled an $8.3 billion quarterly loss and said it would split in two, said its Japanese brokerage, Nikko Cordial Securities, and investment firm, Nikko Asset Management, would go into the unit holding ”non-core businesses”.

Nikko Cordial Securities

Citigroup denies it, but speculation is rife that this means the two will eventually be sold, shrinking the firm back towards what it was for more than a century in Japan — a niche foreign bank.

Citigroup had embarked on an aggressive Japan campaign in recent years, spending about $15 billion for Nikko Cordial and expanding its network beyond tony central Tokyo.

The New York-based firm targeted Japan’s estimated $15 trillion in household financial assets by rebranding itself as a local entity with a global reach.

It became the first overseas bank to win regulatory approval as a local entity and later listed its shares on the Tokyo stock exchange.

But local bankers said the firm would have little success in turning Japanese. Wealthy Japanese retail investors, they warned, had long memories and little appetite for scandal.

Citigroup, the logic went, would never be able to erase the stain of having its private banking business shut down in 2004, when it fell afoul of regulators.

Former Citigroup Chief Executive Charles “Chuck” Prince was still at the helm then, and he faced the cameras with a public bow of apology — a traditional sign of remorse often used by scandal-hit executives in Japan.

“That was by the worst day of my life in a professional sense,” Prince told the Wall Street Journal in 2007. “It was embarassing. It was humilitating. It was demeaning.”

Prince, who engineered the acquisition of Nikko Cordial a few years after the scandal, seemed bent on restoring his reputation, and Citigroup’s, in Japan.

He told the Journal that he hoped to “come back and ring the bell” on the day Citigroup’s shares listed in Tokyo.

The shares listed in November 2007, a day after Prince stepped down to take responsibility for widening subprime losses.

He never got to ring the bell. And Citigroup, it seems, never became Japanese.

Photo credit: REUTERS/Toru Hanai

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