Citigroup Inc executives are using the sale of its Japanese retail brokerage Nikko Cordial to ease demands from the U.S. stress tests on banks, arguing the sale of non-core assets such as Nikko would strengthen its balance sheet, the Financial Times reported, citing people close to the matter.

Citigroup has been in talks with Sumitomo Mitsui Financial Group Inc <8316.T> to sell Nikko Cordial and part of Nikko Citigroup in a deal expected to be worth more than 500 billion yen ($5.2 billion).

People close to the deal told the Financial times the sale of Nikko Cordial could fetch about $7 billion.

While the sale of the brokerage is unlikely to close the capital shortfall identified by the stress tests, it would increase its tangible common equity even as it results in an accounting loss, bankers told the paper.

U.S. officials are leaning toward announcing the stress test results of individual banks next week instead of just summary results, a source familiar with administration talks told Reuters on Thursday.

Regulators are putting more emphasis on common equity, because they say it is more flexible and can absorb losses better than other forms of capital.

Earlier this week, the Wall Street Journal reported Citigroup may have to raise more capital after preliminary results of its stress tests.

(Reporting by Jennifer Robin Raj in Bangalore; Editing by Anshuman Daga)

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