* Nomura, T&D among bidders for Nikko Asset - sources
* Deal likely to be worth over $1 billion
* Citi shedding assets in wake of subprime crisis
* Deal could change asset management landscape - analyst
By Taro Fuse and Chikafumi Hodo
TOKYO, June 16 (Reuters) - Investment bank Nomura and insurer T&D Holdings are among five firms in the second round of bidding for Citigroup's asset management arm in Japan, in a deal likely to top $1 billion, five sources familiar with the matter said.
Citigroup is looking to sell Nikko Asset Management, Japan's third-largest fund manager with about $90 billion in assets under management, as part of efforts to recover from heavy losses in the global financial crisis.
"This could change the landscape of the Japanese asset management industry," said Tatsuo Majima, senior analyst at Tokai Tokyo Research Center.
The deal could intensify competition for the country's $15 trillion in household assets, most of which is still parked in low-yielding deposit accounts.
Last week, BlackRock Inc agreed to buy Barclays Global Investors for $13.5 billion, creating the world's largest money manager. Both BlackRock and BGI have large operations in Japan.
Mid-sized Japanese lender Sumitomo Trust and Banking is also bidding for Nikko Asset, the sources said, declining to be identified because they are not authorised to speak publicly about the deal.
The sale of Nikko Asset comes after Citigroup last month agreed to sell Japanese brokerage Nikko Cordial and key investment banking assets to SMFG, the country's third-largest bank, for about $5.9 billion.
Officials from Citigroup, Nomura, T&D and Sumitomo Trust declined to comment.
Citigroup is expected to narrow the list of potential buyers to around two and take final bids as early as this month, the sources said.
SUMITOMO TRUST
Citigroup spent about 1.5 trillion yen ($15.6 billion) to acquire the Nikko Cordial franchise in a transaction completed early last year, aiming to expand in the world's second-largest economy.
That deal gave it control of Nikko Asset, led by chief executive Tim McCarthy and president Bill Wilder, former head of Fidelity Investments Japan.
Acquiring Nikko Asset would make sense for T&D Holdings, which should have no problem financing the deal after bolstering its capital earlier this year and following the recent rally in share prices, Tokai Tokyo's Majima said.
"T&D is keen to raise its own performance in investments after suffering huge losses on equities and hedge fund investments last financial year," he said.
It would also be a sensible move for Sumitomo Trust, which would benefit greatly from Nikko Asset's marketing network and know-how, said an executive of a non-Japanese asset management company, speaking on the condition of anonymity.
The benefits of a deal are less clear for Nomura Asset Management, the executive said.
"Nomura could firm up its position as the top asset company in Japan if it successfully acquired Nikko. But I doubt whether the tie-up could bring a lot of synergy to Nomura considering it already has strong marketing power and a solid network."
Nikko Asset has increased its independence under the leadership of McCarthy and Wilder and sells funds through a network of banks, instead of relying on Nikko Cordial for distribution.
That strategy differs from other Japanese asset management companies, including industry leader Nomura and No. 2 Daiwa Asset Management, which rely more heavily on brokerage affiliates to move their products.
Citigroup also has plans to sell Japanese telemarketer Bellsystem24 Inc in a deal that could be worth around $1.5 billion, people familiar with the matter have told Reuters.
Nomura shares fell 8.8 percent on Tuesday, while T&D Holdings dropped 5.5 percent. The benchmark Nikkei average shed 2.9 percent. (Additional reporting by Taiga Uranaka, Junko Fujita, David Dolan and Chikafumi Hodo; Editing by Joseph Radford and Dan Lalor) ($1 = 96.47 yen)