Sep. 10--TOKYO -- Sumitomo Mitsui Financial Group Inc. and Daiwa Securities Group Inc. on Thursday officially announced the termination of their capital tie-up for Daiwa Securities SMBC Co., ending their 10-year brokerage joint venture for corporate customers.

The decision follows SMFG's agreement in May to buy Nikko Cordial Securities Inc. and part of Nikko Citigroup Ltd. from Citigroup Inc. of the United States. The move is widely seen as having widened the differences in business strategies of SMFG and Daiwa Securities Group.

SMFG, a major Japanese banking group, currently holds a stake of 40 percent in the joint venture while Daiwa Securities Group holds the remainder.

Under their latest agreement, Daiwa Securities Group will buy the SMFG stake for about 200 billion yen by the end of this year and borrow 100 billion yen from SMFG's key banking unit Sumitomo Mitsui Banking Corp. for the purchase.

SMFG is set to complete the purchase of Nikko Cordial, a retail brokerage house, and part of Nikko Citigroup, a wholesale brokerage house, from Citigroup on Oct. 1.

Ahead of the planned purchase, SMFG had been in talks with Daiwa to integrate Daiwa Securities SMBC and the Nikko Citigroup operations due to come under its control into a new company in which SMFG would hold a controlling equity stake, according to sources close to the matter.

But Daiwa was unwilling to lose control and the negotiations fell apart, they said.

"For the coalition of bank and brokerage businesses, we thought it would be better for future operations if a bank takes the initiative," SMFG Chairman Masayuki Oku said at a press conference.

But the difference in view between SMFG and Daiwa on the matter was "large," he said.

SMFG will withdraw most of its executives and employees from Daiwa Securities SMBC on Oct. 1.

Despite the termination of the brokerage venture, the two financial giants said they will maintain friendly and trusting relations.

Daiwa Securities Group and SMFG agreed to maintain Daiwa Securities SMBC's wholly owned private equity investment unit Daiwa Securities SMBC Principal Investments Co. as a joint venture, which will be owned 60 percent by Daiwa Securities Group and 40 percent by SMFG.

SMFG and Daiwa Securities Group said they will also explore the possibility of a new business alliance in the investment banking area.

The joint venture was formed in 1999 by the Daiwa group and Sumitomo Bank, a predecessor of SMFG.

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