While a sale would raise cash, Citigroup's capital level could suffer if the bank were forced to sell assets at too low a price, a big negative for a company reeling from more than $85 billion of writedowns and credit costs since mid-2007.
Citigroup put retail brokerage Nikko Cordial Securities up for sale in February. The bank may also sell all or part of its Nikko Citigroup investment banking and Nikko Asset Management fund management units, along with the retail brokerage, the sources said.
Jon Diat, a spokesman for Citigroup in New York, declined to comment.
Japan's Kyodo News, citing banking sources, reported earlier that the three Nikko businesses combined could be priced at 800 billion yen ($7.98 billion).
Citigroup spent 1.5 trillion yen ($14.96 billion) to acquire the franchise, so selling the assets at a little more than half that could result in a capital hit.
The sources, who requested anonymity because they were not authorized to speak publicly about the matter, said Citigroup hoped to fetch a higher price by selling the units together.
In February, Citigroup's efforts to sell Nikko Cordial drew interest from Japan's top three banks: Mitsubishi UFJ Financial Group <8306.T>, Mizuho Financial Group <8411.T> and Sumitomo Mitsui Financial Group <8316.T>. Nikko Cordial has about 110 branches across Japan.
Now, Citigroup is wondering if adding additional assets to that sale would bolster demand. Nikko Cordial on its own may only sell for about 400 billion yen, an executive at a Japanese bank told Reuters.
Citigroup shares were up 55 cents, or 18 percent, at $3.59 in Monday afternoon trade on the New York Stock Exchange.
Citigroup plans to seek bids for its Japanese investment banking operations on April 20, the sources said. It may opt to sell just part of Nikko Citigroup, they said.
The government has propped up Citigroup three times since October, and the bank has taken more than $45 billion of taxpayer money. The government is expected to become Citigroup's largest investor, with a potential 36 percent stake.
Citigroup has divided its assets into Citicorp, which houses the businesses it considers its main operations, and Citi Holdings, which includes units and assets it is looking to shed, including Nikko Cordial and Nikko Asset Management.
Until recently, the bank viewed Nikko Citigroup as a major unit that it intended to hold onto.
Nikko Citigroup is struggling amid the market downturn and a dearth of investment banking deals. Its net loss doubled to 14.5 billion yen for the nine months to end-December.
($1 = 100.238 yen)
(Reporting by Taro Fuse and Emi Emoto, editing by Matthew Lewis and John Wallace)