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David Dolan, Kiyoshi Takenaka05 Nov 2007 09:56
Shares of Citigroup rose 5% in their debut on the Tokyo bourse on Monday, a day after the United States bank’s head resigned to take responsibility for spiralling losses on subprime-related investments.
Charles Prince stepped down after four years as Citigroup’s chief on Sunday after the bank said it may suffer an $11-billion write-down for subprime losses, on top of $6,5-billion it wrote off three weeks ago.
Listing in Tokyo will aid the bank’s plan to buy out minority shareholders in its Japanese brokerage unit, Nikko Cordial, and is part of a campaign to raise its investor profile and become a major player in local retail banking.
Citigroup has been on a push to rehabilitate its reputation in Japan, which was tarnished three years ago when regulators shut down its private banking operations for violation of banking laws.
But the high-profile listing was overshadowed by Prince’s departure. The bank cancelled a news conference about its plans to expand in Japan.
A spokesperson for the bank declined to comment on the reason for the cancellation.
At a bell-ringing ceremony at the Tokyo Stock Exchange, Douglas Peterson, Citigroup’s chief executive in Japan, said the listing was a “natural next step” in its commitment to Japan.
“In this year alone, we’ve formed a comprehensive strategic alliance with Nikko Cordial, localised our banking operation and now, today, listed on the Tokyo Stock Exchange,” he said.
Nikko Cordial Corp is Japan’s third-largest brokerage.
Peterson later declined to answer questions as he made his way past a group of reporters after the ceremony.
Even as Citigroup weathers rising subprime losses, its strategy of targeting millions of affluent Japanese is unlikely to change, said Graeme Knowd, a banking analyst at CLSA Asia-Pacific Markets in Tokyo
“I think Japan, for them, has been relatively successful.” Knowd said.
“Citigroup is still the only foreign bank that has a large retail presence here.”
The bell tolls
Prince (57) made Japan a major part of his quest to boost the bank’s overseas profits.
In 2004, when Japanese regulators shut down Citigroup’s private banking business, the California native made a public bow of apology—the traditional sign of remorse used by Japanese executives.
“That was by far the worst day of my life in a professional sense,” Prince recalled in a Wall Street Journal interview in July.
“It was embarrassing. It was humiliating. It was demeaning,” he told the Journal.
Prince also told the paper he wanted to “come back and ring the bell” on the day the bank’s shares were listed in Tokyo.
Prince engineered Citigroup’s acquisition of a majority stake in Nikko Cordial earlier this year. At about $8-billion, the purchase was Citigroup’s largest in Asia, and its largest under Prince.
The bank said last month it would buy out the brokerage’s minority shareholders for an additional $4,6-billion, taking full control of about 100 brokerage outlets and a name well-known to domestic investors.
As part of the deal, Citigroup said it would use its own shares to buy the remaining 32% in Nikko it did not own, meaning listing locally would make the share swap easier.
The expansion came after Citigroup relaunched itself as a Japanese lender earlier this year, becoming the first foreign bank to receive regulatory approval to operate as a local entity.
Through its retail banking and securities business, Citigroup is looking to target Japan’s roughly $13-trillion in household financial assets. In particular, the US firm is homing in on the legions of “mass affluent”, those with liquid assets of ¥10-million or more.
Shares of Citigroup finished at ¥4 550 on the Tokyo bourse on Monday, up 5,1% from their tentative starting price of ¥4 330. That price was a conversion into yen of the stock’s closing price in New York on Friday.
But like other foreign shares on the Tokyo exchange, trade in Citigroup was light. Just 9 700 shares had changed hands, a sliver of the more than 60-million traded in Mitsubishi UFJ Financial Group, Japan’s largest bank.
Shares of Citigroup were untraded for about the last two hours of the day.
“It was a really poor showing, in terms of trade volume,” said Ken Masuda, senior equities dealer at Shinko Securities.
Masuda said most Japanese investors would rather buy the stock in New York, where they are assured of better liquidity.
Citicorp, Citigroup’s predecessor, was listed on the Tokyo Stock Exchange in 1973. It was delisted in 1998, following the merger of Citicorp and Travelers Group, which created Citigroup.
In addition to New York and Tokyo, shares of Citigroup are also listed in Mexico. - Reuters
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