Citigroup to Launch Debt Collection Operation in Japan

TOKYO – Citigroup Inc will soon enter Japan’s debt collection market by acquiring a Japanese debt-servicing subsidiary of Australia’s Lend Lease Corp.

In Japan, Citigroup has mainly bought and sold large nonperforming loans, but an increase in midsize accounts involving regional banks has led the US financial giant to seek higher profits by extending its reach to debt collection. Lend Lease will effectively pull out of the Japanese market as a result of the sale.

The purchase price of the unit is expected to be about 300-400 million yen (US$2.8-3.7 million). Citigroup could launch the debt collection business as early as within the year.

Wholly owned Citigroup Principal Investments (Japan) Ltd. began dealing in nonperforming loans in August 1999, and has purchased about 4 trillion yen in loans to date. A revitalization fund recently established with Hiroshima Bank and Eighteenth Bank has helped facilitate its acquisition of loans from regional banks.

As a result of administrative penalties issued by the Financial Services Agency, Citigroup will close Cititrust and Banking Corp. as well as its private banking operations in Japan. But it will strengthen its revitalization business to serve as a profit generator for the corporate transaction segment.

A Citigroup representative says that the organization and client base of the investment banking department, including the revitalization business, are different from those of the private banking operation.