Sumitomo Mitsui Financial Group is considering increasing its stake in Jefferies Financial Group as the Japanese lender deepens ties with the U.S. investment bank, according to people familiar with the matter.

Tokyo-based Sumitomo Mitsui is in talks to boost its roughly 15% stake in Jefferies, potentially by acquiring preferred stock, the people said, asking not to be identified because the negotiations are confidential. One option under discussion is for Japan’s second-largest bank to invest more than ¥100 billion ($677 million) to raise its ownership to about 20%, one of the people said.

The two firms are also in discussions to merge parts of their equities businesses in Japan, potentially through the establishment of a joint venture between SMBC Nikko Securities and Jefferies’ local operation, the people said.

Nothing has been decided, details could change and negotiations could fall apart, according to the people.

Sumitomo Mitsui wasn’t immediately available for comment. A spokesperson for New York-based Jefferies declined to comment.

Jefferies shares rallied as much as 6% to $70.50 on Thursday to hit the highest intraday price since Feb. 19 after Bloomberg News reported the talks. The move pares this year’s losses to give the firm a market capitalization of more than $14 billion.

Japan’s biggest banks are bolstering ties with U.S. counterparts to broaden revenue streams across borders and business lines.

In 2023, Mizuho Financial Group acquired boutique investment bank Greenhill & Co. in a $550 million deal to offer more advice on global mergers. Mitsubishi UFJ Financial Group bought a stake in Morgan Stanley during the 2008 global financial crisis and remains its biggest shareholder.

Sumitomo Mitsui entered into a capital and business alliance with Jefferies in 2021 to strengthen investment banking operations including advising on cross-border acquisitions. Chief Executive Officer Toru Nakashima said in a December interview that he was keen to expand the tie-up in areas such as equities.

The latest move comes after U.S. regulators this month lifted an order that potentially limited Sumitomo Mitsui’s expansion in the country. The U.S. Federal Reserve had imposed the enforcement action in 2019 over weak anti-money laundering controls at the bank’s New York branch.

Jefferies (Japan) Ltd., as the U.S. firm’s local arm is known, is a "key component” of the group’s plan to develop its trading capacity across Asia, according to filings.

Its Japan operations remain much smaller than the likes of Goldman Sachs Group and Citigroup, with about 90 employees in areas including stock and fixed-income trading, advisory and equity research. The unit posted double-digit revenue growth in the year through November, although net profit fell 40% to ¥750 million as costs climbed, according to the latest available data.

SMBC Nikko, the securities arm of Sumitomo Mitsui, has been seeking to rebuild following a stock market manipulation scandal that emerged in 2022 that led to criminal convictions against the firm and several former executives. The unit made a series of key hires earlier this year and restarted block trading, the business at the center of the regulatory probe.

The century-old brokerage had more than 9,000 locally hired employees as of March, according to its website. It reported a 2% drop in net profit for the three months ended June 30.

SMBC Nikko is based in the Marunouchi Shin Tokyo Building in Tokyo’s central business district. Jefferies is located about 10 minutes’ walk from there at Tokyo Midtown Hibiya.

The two firms have expanded their initial partnership to numerous geographies over the years, including Europe, the Middle East and Africa, and want to grow further in Asia-Pacific.