In an effort to boost its capital, Sumitomo Mitsui Financial Group Inc. will issue an additional 250 billion yen in shares by the end of March, it was learned Sunday.
The move is being attributed to the group’s expected increase in bad-loan disposals and a decline in the value of its shareholdings.
The decision, to be officially announced as early as this week, follows the issuance of 150 billion yen worth of shares to Goldman Sachs Group Inc.
The new plan means that at least 2 trillion yen will have been raised through new stock issues by the top five banking groups.
The figure is comparable to the combined total of 2.15 trillion yen in new shares issued by large banks when they received public-fund injections in fiscal 1998.
Last November, Sumitomo Mitsui estimated that the amount of its bad-loan disposals for the current business year would be 700 billion yen. That amount, however, is now expected to increase.
Under Sumitomo Mitsui Financial Group, Sumitomo Mitsui Banking Corp. will be able to process the amount of unrealized capital losses on its shares by the planned merger with Wakashio Bank, its second-tier regional banking subsidiary. But the group decided to reinforce its capital with the new issuance due to fears over the additional losses that a large drop in share prices could precipitate, the sources said.
The additional funds will be raised in the form of preferred stock through third-party allocations, as was the case with the share sales to Goldman Sachs.
Sumitomo Mitsui is considering allotting the new shares to domestic and foreign institutional investors but will likely sell them mainly to foreign institutional investors, according to the sources.
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