Sumitomo Mitsui Financial Group Inc., Japan's second-largest, plans to form an investment banking unit by hiring bankers from Citigroup Inc., including Masuo Fukuda and Taro Hayashi, it said Monday.

Fukuda, a co-head of global banking at Nikko Citigroup Ltd., and Hayashi, a co-head of capital markets origination there, are to join Sumitomo Mitsui's Nikko Cordial Securities Inc. on Oct. 1, the company said in an e-mailed statement.

About 200 people from Nikko Citigroup will move to Sumitomo, Yumiko Iuchi, Nikko Citigroup's Tokyo spokeswoman, said by phone.

Investment banking revenue may help Sumitomo Mitsui fend off competition from larger rivals such as Mitsubishi UFJ Financial Group Inc., which plans to merge its securities unit with Morgan Stanley's local business.

New York's Citigroup agreed in May to sell Nikko Cordial and parts of Nikko Citigroup to Sumitomo Mitsui for $5.7 billion.

"The competition has been intensifying in Japan," said Makoto Haga, the chief strategist at the Tokyo securities firm Monex Group Inc.

"Sumitomo Mitsui needs a full-fledged banking operation to compete with Mitsubishi UFJ and other rivals," he said.

The Japanese company also owns a 40% stake in Daiwa Securities SMBC Co., an investment banking venture with Daiwa Securities Group Inc.

The banking company is in talks with Daiwa Securities Group to raise its stake in their joint venture to a majority, two people familiar with the situation said last week, declining to be identified because the matter is private.

The employees who will move to Sumitomo Mitsui include bankers covering technology, energy and consumer industries, people familiar with the situation said on Aug. 17.

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