JAPAN'S DAIWA OPEN TO MERGING WHOLESALE OPERATIONS WITH NIKKO

Daiwa Securities Group Inc. (TSE:8601) President Shigeharu Suzuki indicated Tuesday that he will consider merging Daiwa Securities SMBC Co. with the Nikko group wholesale brokerage operations that Sumitomo Mitsui Financial Group Inc. (TSE:8316) is acquiring.

Combining Daiwa SMBC -- the wholesale brokerage joint venture of Daiwa Securities and SMFG -- and Nikko's wholesale brokerage operations has become a major issue since SMFG announced May 1 that it will purchase retail brokerage Nikko Cordial Inc. and most of wholesale brokerage Nikko Citigroup Ltd. from Citigroup Inc. (TSE:8710).

That Daiwa Securities and SMBC have competing wholesale brokerage operations "poses a problem," Suzuki said at a briefing for investors. "We will deal with the matter in a forward-looking manner."

"We've worked together with SMFG for a long time and discussions will be held to ensure that this latest development benefits both of us," Suzuki also said.

Masayuki Oku, president of SMFG's retail banking arm, Sumitomo Mitsui Banking Corp., has already expressed a willingness to realize the operational merger, saying it is "a viable option."

With Suzuki also sounding a positive note now, Daiwa Securities and SMFG are expected to start talks on the matter after SMFG concludes negotiations with Citigroup on the details of the Nikko purchase.

Meanwhile, Suzuki flatly denied the idea of a broader merger between Daiwa Securities, SMFG and the Nikko group.

He also said that SMFG's latest move "will not result in a change in ownership stakes" in Daiwa SMBC, of which Daiwa Securities owns 60% and SMFG 40%. "The current setup is working very well and will be maintained," said Suzuki.

(Nikkei)

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