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Sumitomo Trust and Banking said it will buy Citigroup's [
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] Japanese asset manager for 112.4 billion yen ($1.18 billion), as Japan's fifth-largest bank looks for scale amid tough competition in wealth management.
Sumitomo Trust said it will raise 109 billion yen through the issuance of preferred shares to strengthen its financial base.
Sumitomo Trust said it will acquire the unit, Nikko Asset Management, by October 1.
Acquiring Nikko Asset, Japan's third-largest fund manager, will make Sumitomo Trust one of the country's top asset managers. Nikko Asset currently manages 8.8 trillion yen in assets, bringing Sumitomo Trust's total to 34.5 trillion yen.
The asset management business is one of the few areas in Japan -- home to a rapidly ageing population -- where financial firms see big opportunities for growth. The world's second-largest economy boasts a staggering $15 trillion in household savings, with much of it parked in low-yielding deposits.
But competition is fierce. In addition to domestic players such as Nomura Holdings and Daiwa Securities Group, overseas firms such as BlackRock [BRK
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] and Barclays are vying to woo millions of wealthy Japanese.
These cash-rich investors are increasingly looking for better advisory services and more sophisticated investment products.
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Institutional investors, including pension funds and life insurers, are also looking for advice to manage their huge portfolios, especially after the financial crisis and amid Japan's ultra-low interest rates.
The acquisition is likely to strengthen Sumitomo Trust's product lineup, as Nikko Asset has experience in developing new products for institutional and retail investors.
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Mark Lennihan / AP |
The sale of Nikko Asset is the second stage of Citigroup's retreat from many of its Japanese assets.
It has already sold retail broker Nikko Cordial Securities and key investment banking units to Sumitomo Mitsui Financial Group, Japan's third-largest bank, for about $5.9 billion.
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