Mitsubishi UFJ Trust & Banking Corp. and Nikko Citi Holdings Inc. said Thursday that they have agreed to scrap the deal for the Japanese trust bank to acquire a trust bank from Citigroup Inc. for about $259 million.

Mitsubishi UFJ Trust, the trust bank unit of Mitsubishi UFJ Financial Group Inc. (8306.TO), in December agreed to buy Citigroup Japan's trust banking unit, NikkoCiti Trust & Banking Corp., as part of the U.S. bank's restructuring.

The Tokyo trust bank had planned to complete the deal by April 1, but the deadline was postponed until the end of this year as it had to look into NikkoCiti Trust's situation after it was discovered that it had some exposure to SFCG Co., a lender that filed for bankruptcy in March.

The decision to cancel the acquisition came after MUFG didn't win a bid to buy Citigroup's Japanese brokerage operations. Sumitomo Mitsui Financial Group Inc. (8316.TO) earlier this month said it plans to buy Nikko Cordial Securities and parts of investment bank Nikko Citigroup on Oct. 1.

-By Atsuko Fukase, Dow Jones Newswires; 813-6895-7567; atsuko.fukase@dowjones.com