UPDATE: SMFG Looks To Jump Into Booming Asian Markets
June 13 2011 - 11:57AM
Dow Jones News
Sumitomo Mitsui Financial Group Inc. (8316.TO) plans to ramp up
its operations in China, India and Southeast Asia to become a
global player better equipped to compete with Western financial
powerhouses, top executives at the bank said.
Options being considered include acquiring loan portfolios from
Western financial institutions, as well as tie-ups with local
players, said SMFG President Koichi Miyata in a recent
interview.
With the Japanese market looking saturated amid a shrinking
population, the country's top three banks are vying to gain a
bigger slice of Asia's fast-growing economies. Even though the
banks escaped the global financial crisis relatively unscathed
compared with Western rivals, they are lagging behind other global
lenders to fully tap into demand in emerging markets. Other
financial institutions such as brokerages and nonlife insurance
firms are also hiring staff in the region or investing in local
firms.
SMFG, Japan's second-largest bank by market capitalization after
Mitsubishi UFJ Financial Group Inc., wants to increase the volume
of its overseas lending to 15 trillion yen ($187 billion) from the
current JPY9 trillion in the next three years, said Miyata, 57
years old, who became SMFG's president in April. The bank also
hopes to boost profit from its international business to 30% of the
total over the same time frame, from 23% last year, he said.
"I think growing organically is our basic approach, but if that
limits our growth," the bank will consider mergers and acquisitions
or capital tie-ups, Miyata said.
Japan's largest bank, Mitsubishi UFJ Financial Group (8306.TO),
last year bought Royal Bank of Scotland Group PLC's (RBS, RBS.LN)
project-finance loan portfolios, totaling 3.3 billion pounds ($5.38
billion), mainly for infrastructure projects in Europe, Africa and
the Middle East.
Mizuho Financial Group Inc. (8411.TO, MFG), Japan's
third-largest bank by market capitalization, is also beefing up
business in Asia by hiring staff in the region and forming tie-ups
with local players in India, Vietnam, Malaysia and China.
Miyata, who worked in SMFG's trading operations for more than a
decade and oversaw the company's markets division until last year,
said asset purchases from Western rivals is one possible
option.
"Our idea is that [such asset purchases] will likely cover Asia,
closer to Japan," he said.
A tie-up with a local asset-management firm is also an option,
he said, noting that markets with burgeoning middle classes such as
China and Thailand are of interest.
In a separate interview, Takeshi Kunibe, 57 years old, president
and chief executive of core SMFG banking unit Sumitomo Mitsui
Banking Corp., said the bank aims to allocate an additional 400
employees overseas by hiring local staff and transferring workers
from Tokyo in the current fiscal year.
Kunibe said there are no specific deals currently on the table,
but any new investments could be bigger than previous deals. SMFG
and its unit SMBC have started forming alliances with financial
institutions in Asia, including in emerging markets, each valued at
less than JPY50 billion.
Last year SMBC bought 4.5% of India's Kotak Mahindra Bank
(500247.BY) for about JPY26 billion, and it strengthened its ties
with Malaysia's RHB Capital Bhd. (1066.KU) in December. The group
also acquired a roughly 2% stake in South Korea's Kookmin Bank, a
commercial banking unit of KB Financial Group Inc. (KB, 105560.SE),
in 2008.
As its focus shifts to emerging markets, the Japanese banking
giant also faces a headache at home with utility Tokyo Electric
Power Co. (9501.TO), known as Tepco.
SMBC provided about JPY600 billion in emergency loans to Tepco
in March, one of a group of banks to provide funding to the
embattled utility as it struggled to cope with the impact of the
crisis at the earthquake-damaged Fukushima Daiichi nuclear-power
plant that it operates.
With fundraising in the market nearly impossible for Tepco after
a series of credit downgrades, the company may need further support
from the government and its creditors as it prepares for huge
compensation payments to those affected by the disaster.
SMBC's Kunibe said his bank isn't worried about Tepco's
financing for now, adding that he doesn't think additional loans
are necessary and that the bank hasn't received any additional loan
requests.
-By Atsuko Fukase, Dow Jones Newswires;
atsuko.fukase@dowjones.com
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