JAPAN’S SUMITOMO Mitsui Financial Group (SMFG) is seeking to expand its wholesale investment banking business at home and overseas, potentially through acquisitions, its chief executive said yesterday.
“Moves, like mergers and acquisitions and consolidation, will occur in industries both within and outside Japan, and we will obviously strengthen such [investment banking businesses] as well. We will consider a combination of organic and inorganic growth [in doing so],” Teisuke Kitayama said in an interview.
Mr Kitayama said ongoing instability in the financial sector presented opportunities for banks, including SMFG, to reposition themselves.
“Compared to a year ago, things have become more stable. But under the new [Bank for International Settlements’ Basel committee capital adequacy] regulations, and because the economy is not necessarily functioning smoothly because it is being supported by . . . fiscal stimulus measures . . . I think there will be many more moves [such as mergers and acquisitions] as [banks] pursue a new order,” he said.
SMFG, Japan’s third-largest banking group, bought the country’s third-largest broker, Nikko Cordial, from Citigroup last April. While the 500 billion yen (€3.8 billion) acquisition has given SMFG a substantial retail base, Nikko Cordial’s wholesale operations are relatively small and it does not have an overseas presence.
Nikko Cordial said yesterday that Sumitomo Mitsui Bank would start providing Nikko’s brokerage services to its corporate customers through its domestic branches from January 4th.
Mr Kitayama also indicated that the investment banking group, which has a tie-up with Citigroup in overseas markets, would eventually need to build its own overseas presence.
Management at Nikko Cordial is believed to be in the process of putting together a midterm business plan, which could provide clarification on its growth strategy. Nikko Cordial is a key element of SMFG’s own growth strategy as it faces a stagnant market for loans in Japan. “There are few examples of banks buying investment banks and succeeding,” said Shinichi Ina, banking analyst at Credit Suisse in Tokyo. SMFG is expected to tap the market for funds to bolster its capital base soon.
– (Copyright The Financial Times Limited 2009)
