( ´゜д゜｀)英字新聞

Nikko Cordial buyout heralds new competition
The financial crisis, which originated in the United States, has brought a drastic change to Japan's banking and securities industry.
Sumitomo Mitsui Financial Group Inc. has agreed to acquire Nikko Cordial Securities Inc. and the domestic operation of Nikko Citigroup Ltd. from Citigroup Inc. of the United States, which is in the midst of restructuring efforts.
It will be the first time that one of Japan's three leading securities brokerages--Nomura Securities Co., Daiwa Securities Co. and Nikko--has been placed under the umbrella of one of Japan's three mega banks. With the buyout, SMFG will be able to strengthen its securities brokering business for individual clients, which has been weak compared to those of its rivals. By doing so, the financial group will change the industry's power structure.
Both Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. have been expanding the operations of their securities brokerage companies to levels almost parallel to those of the major securities companies.
The latest move by SMFG will herald a new era of competition among the three huge financial groups offering both banking and brokerage services as they vie for the lion's share of the 1.4 quadrillion yen in financial assets currently held by Japanese individuals.
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Citigroup forced to sell
In the face of the massive losses it incurred in the wake of the bankruptcy of Lehman Brothers, Citigroup had no choice but to sell the Nikko group it had made its subsidiary last year. Citigroup's withdrawal from the brokerage business in Japan will be a major blow to the financial institution, considering the potential the business represents.
The three mega banks that sought to buy Nikko Cordial and the domestic operation of Nikko Citigroup Ltd. are all expected to report losses in their fiscal 2008 settlement of accounts. Although their financial situations are not favorable, they believed the acquisition of Nikko would provided a prime opportunity to strengthen brokerage operations catering to individual investors--a line of business that can promise a stable source of earnings.
SMFG, in particular, was falling behind its rivals in the retail brokerage business, although it has a securities firm for corporate investors it jointly set up with Daiwa Securities Group Inc.
SMFG gambled on this opportunity by spending more than 500 billion yen for the acquisition at this difficult financial juncture because it apparently believes the deal is its last chance to turn its fortunes around.
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Ball now in Daiwa's court
Attention is now focused on what moves SMFG's tie-up partner, Daiwa, will make: How will Daiwa move to cooperate with Nikko in their corporate brokerage business? If Daiwa and Nikko join forces in catering to individual investors, they will form a major brokerage grouping capable of surpassing industry giant Nomura.
Nomura's next possible move is also being closely watched. Will Nomura go it alone, or will it seek a realignment with a bank or other financial institutions?
The business environment in the securities industry is grim at best, with the nation's six biggest brokerage firms all reporting losses. The change in ownership at Nikko can accelerate the speed of the industry's realignment.
But merely having both banking and brokerage businesses under one umbrella or expanding the scope of business will not ensure the survival of the mega financial institutions. Citigroup's current financial problems have demonstrated that a financial institution merely seeking expansion and short-term profits could eventually come to the end of the line.
All financial institutions face the challenge of providing high-quality services that can accommodate a growing need for individuals to wisely manage their assets as a result of the nation's declining birthrate and the graying of its population.
The banks and securities firms also should not forget their main duty is to act as the "bloodstream of the economy" and support the development of new industries.