UPDATE:Nomura Holdings Likely To Buy NikkoCiti Trust -Source

Nomura Holdings Inc. (8604.TO) is in final talks to buy Citigroup Inc.'s (C) Japanese trust banking unit for about Y20 billion, a person familiar with the transaction said Wednesday.

The acquisition by Nomura Trust and Banking Co., a unit of Japan's largest brokerage by assets, is likely to be announced later today, the person said.

Buoyed by a high savings rate and prudent credit system, Japanese megabanks and brokerages have been cherry-picking U.S. financial assets to boost their market reach in the face of a shrinking domestic base.

Mitsubishi UFJ Trust & Banking Corp. had already attempted to buy the unit for Y25 billion, or around $260 million, in May, but the deal fell apart after it failed to buy Nikko Cordial, Citigroup's Japanese brokerage operations.

Citigroup agreed to sell Nikko Cordial Securities and part of Nikko Citigroup to Sumitomo Mitsui Financial Group (8316.TO), Japan's third-biggest bank by assets, for $5.6 billion.

The U.S.-based financial services group, which has received $50 billion in U.S. government aid, started the sales process of NikkoCiti trust last December as part of its restructuring efforts.

Citigroup is offloading other Japanese assets such as Nikko Asset Management, with Sumitomo Trust emerging as the likely buyer for around Y100 billion. It is also reportedly selling call service center Bellsystem24, currently owned by Nikko Principal Investments Japan, Citigroup's private equity arm, valued at around $1.5 billion.

Japanese financial service industry players have already been active in picking up cheap assets where they can.

As the credit crisis was unfolding last September, Nomura bought Lehman's Asian, European and Middle Eastern assets. Mitsubishi UFJ Financial Group also made a $9 billion investment in Morgan Stanley and just announced details of its joint venture with the U.S. firm that will extend MUFG's overseas corporate financial services leveraging Morgan Stanley's international network.

Merger and acquisition activity in the domestic banking sector is also on the boil, with beleaguered Shinsei Bank and Aozora Bank scheduled to announce their merger later Wednesday.

-By Tor Ching Li, Dow Jones Newswires; 813-6895-7567, [e-mail]