Citigroup said it is to sell Nikko Cordial Securities, the Japanese brokerage it acquired full ownership of last year, to Sumitomo Mitsui Banking Corporation for a total cash value of ¥774.5 billion ($7.9 billion).

The deal, which will close at the end of the fourth quarter of this year, is expected to generate $2.5 billion of tangible common equity for Citi, with the US bank anticipating an after-tax loss of around $0.2 billion. On a pro-forma basis, the transaction will have increased Citi’s Tier 1 capital ratio by 27 basis points, the bank said.

The total value of the deal is comprised of a purchase price for Nikko Cordial of ¥545 billion, ¥28.5 billion for certain Japanese-listed equity securities held by Citi, and ¥201 billion of cash derived either through the retention of excess cash in Nikko Cordial or repayment of its outstanding indebtedness to Citi.

Sumitomo Mitsui said the acquisition will bring in ¥24 trillion in assets under account and 3,000 sales advisors, bringing its total assets to ¥64 trillion and its headcount to 9,800.

According to media reports, Sumitomo Mitsui fended off rival bids from Mitsubishi UFJ Financial Group and Mizuho Financial Group to clinch the deal.

“This transaction is another step in the execution of the Citicorp/Citi Holdings strategy we announced earlier this year. We will continue to look for additional opportunities to maximise the value of businesses and assets as we rationalise and restructure Citi Holdings,” said Citi chief executive Vikram Pandit. 

In January Citi split into two divisions, Citicorp and Citi Holdings, in a move aimed at strengthening the firm’s new structure. The former focuses on banking activities including private banking, while Citi Holdings holds the firm’s brokerage, retail asset management, consumer finance unit, along with a special pool of distressed assets.

Citi, which reported a full-year net loss of $18.72 billion for 2008, received some $45 billion in funds from the US government’s Troubled Asset Relief Programme.