Nikko Cordial, Japan's third-largest securities firm, faces delisting from the Tokyo Stock Exchange due to an accounting scandal. Citigroup owns a 4.9% stake in Nikko Cordial and 49% of the Nikko Citigroup investment bank joint-venture. There has been speculation Mizuho Financial Group, which owns a similar 5% stake in Nikko Cordial, might be willing to make an investment in the troubled brokerage, but only once its legal issues are resolved. Citigroup could also make an investment, but it is probably more concerned with determining what to do with its joint-venture, while working on plans to expand its domestic banking footprint and pursuing a Tokyo Stock Exchange listing. The former head of investment banking at Merrill Lynch Japan and current co-CEO and President of NIS Group comments, "As Nikko's reputation worsens, Citigroup may want to buy Nikko's stake in the joint venture to continue investment-banking operations in Japan on its own. It would be a waste just to sell the business to someone else."
Commentary: Eye on the Prize: Citigroup and Mizuho Battle for Nikko Cordial • Examining the Mizuho-Nikko Relationship • Citigroup: Japan Expansion and M&A Could Bring Tokyo Exchange Listing
Stocks/ETFs to watch: Citigroup (NYSE:C), Nikko Cordial (OTC:NIKOY). Competitors: Mizuho Financial Group (NYSE:MFG), Mitsubishi UFJ Financial Group (NYSE:MTU), ABN Amro Holding N.V. (ABN). ETFs: iShares S&P Global Financial Index Fund (NYSEARCA:IXG), iShares Dow Jones US Financial Services (NYSEARCA:IYG), Financial Select Sector SPDR (NYSEARCA:XLF)
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