Sumitomo Mitsui Financial Group Inc.’s securities arm plans to increase the number of employees abroad by 25 percent in the next three years to expand in areas including securitization, trading and investment banking.
SMBC Nikko Securities Inc. is seeking to boost head count overseas, mainly in New York and London, by March 2017 to about 600 from 480, by hiring as well as dispatching employees from Japan, Chief Executive Officer Tetsuya Kubo said in an interview.
The move reflects Tokyo-based Sumitomo Mitsui’s efforts to bolster fee income and expand abroad as low interest rates and a declining population hamper lending profitability at home. Kubo singled out securitization as a priority for growth as the market recovers from the U.S. subprime loan crisis that led to the demise of trading houses Bear Stearns and Lehman Brothers Holdings Inc. in 2008.
“Investors’ risk appetite dropped after the Lehman shock, but now it’s back,” said Kubo, 60. Securitization “has profit potential because we can make the most of our relations with Sumitomo Mitsui’s banking unit.”
SMBC Nikko, part of Japan’s second-biggest banking group by market value, will work on packaging loans tied to automobiles, credit cards, airplanes and project finance into bonds, Kubo said. The firm will add salespeople and traders of fixed-income securities and Japanese stocks, as well as bankers to manage bond sales and advise on M&As, he said.
“We have increased staff abroad, but the operations are still small,” said Kubo, who boosted overseas head count by about 80 in the past year. “I’m not going to add people as if they are accessories. We’ll do it strategically.”
Securitization is showing signs of a comeback after the global credit freeze six years ago. Issuances of U.S. asset-backed securities rose to $186.1 billion in 2013 from $135.4 billion in 2008, according to data compiled by the Securities Industry and Financial Markets Association. The total was $289.7 billion in 2007, the data show.
European Central Bank President Mario Draghi wants to revive the region’s market for asset-backed securities to help small businesses and households obtain credit. He said last week that buying packaged loans could reduce the “drag” on the economy.
Sumitomo Mitsui has a platform for arranging aircraft debts into securities following its $7.3 billion purchase of Royal Bank of Scotland Group Plc’s aviation leasing unit in 2012.
“It’s a new move for Japanese banks to break into foreign banks’ territory,” said Hisayoshi Nogawa, a structured credit strategist at BNP Paribas SA in Tokyo.