Apr. 28--TOKYO -- Sumitomo Mitsui Financial Group Inc. will shortly conclude a basic agreement with Citigroup Inc. to acquire Nikko Cordial Securities Inc. and the bulk of Nikko Citigroup Ltd. for about 500 billion yen, sources familiar with the matter said Tuesday.

The major Japanese banking group and the U.S. financial giant are expected to announce the deal by the end of this week, they said.

SMFG is aiming to strengthen its brokerage operations through the deal. It would mark the first acquisition of one of Japan's top three brokerage houses by a major Japanese bank.

SMFG has close business ties with Daiwa Securities Group Inc., another of the country's major securities house. By acquiring Nikko and further deepening its relationship with Daiwa, SMFG is hoping to create a financial group with brokerage business as strong as current industry leader Nomura Holdings Inc., the sources said.

The total assets under the management of the nation's third-largest Nikko Cordial and second-largest Daiwa would exceed those of Nomura.

Japan's three biggest banking groups -- SMFG, Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. -- joined the bidding for Nikko Cordial conducted by cash-strapped Citigroup recently. SMFG, which reportedly submitted the highest offer, has been granted preferential negotiating rights to buy the brokerage house.

SMFG and Daiwa Securities Group jointly own Daiwa Securities SMBC Co., a brokerage firm specializing in services for corporate clients. As for businesses targeting individual investors, SMFG has a medium sized brokerage house, SMBC Friend Securities Co.

The Daiwa group has appeared reluctant about bank-led industry realignment, the sources said.

But Daiwa Securities Group Director Nobuyuki Iwamoto suggested his intention to strengthen relationships with SMFG at a press conference on Tuesday, when the brokerage firm reported a net loss of 85.04 billion yen for the year that ended in March. "We intend to talk with the aim of maximizing our profits as a business partner," Iwamoto said.

SMFG announced April 9 that it will raise up to 800 billion yen through a public offering, a move seen as aimed at securing funds for the purchase of Nikko Cordial.

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