UPDATE 1-SMFG denies report it eyeing Nikko Asset stake

* SMFG says not considering investment in Nikko Asset

* Shares of SMFG, Sumtiomo Trust down 1%, in line with market

TOKYO, July 3 (Reuters) - Japan's Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research) (SMFG) denied a report it was considering buying a stake in Nikko Asset Management after Citigroup Inc (C.N: Quote, Profile, Research) sells the fund manager to Sumitomo Trust and Banking (8403.T: Quote, Profile, Research).

Sumitomo Trust is in final talks with Citigroup to buy Nikko Asset, Japan's third-largest mutual fund manager, for over 100 billion yen ($1 billion), Japanese media reported last week. [ID:nLQ527711]

The Asahi newspaper reported on Friday that SMFG is considering taking a stake in Nikko Asset after Sumitomo Trust completes its acquisition, without citing the source of the information.

"It is not true that we are considering an investment at this time," said Chika Togawa, a spokeswoman for SMFG, Japan's third-largest bank.

A spokesman for Sumitomo Trust said the bank was not in a position to comment on the report.

SMFG aims to achieve synergy between the investment trust product business of Nikko Asset and the sales operations of Nikko Cordial Securities, the retail brokerage which SMFG agreed in May to buy for 545 billion yen ($5.7 billion), the newspaper said.

Shares of SMFG and Sumitomo Trust were both down 1 percent as of 0453 GMT, roughly in line with the broader market.

Citigroup put Nikko Asset up for sale as part of efforts to recover from heavy losses in the global financial crisis. Earlier this week Citigroup agreed to sell its Japanese trust bank to a unit of Nomura Holdings (8604.T: Quote, Profile, Research) for 19 billion yen, and sources say it is also planning to sell telemarketer Bellsystem24 Inc for more than $1 billion. [ID:nBNG504048] ($1=95.83 Yen) (Reporting by Yumiko Nishitani and David Dolan; Editing by Michael Watson)