Sumitomo Mitsui Financial Group Inc., the nation’s second-biggest bank by market value, plans to buy “several hundred billion yen” of assets being sold by European lenders building capital to weather the region’s debt crisis.
The Tokyo-based bank has received ¥7 trillion in offers from European banks, including infrastructure project loans, Sumitomo Mitsui President Koichi Miyata said in an interview on Dec. 21. Sellers of European banking assets currently outnumber buyers, he said.
“We’ll take time and go for it once we find what we want” Miyata said. “Loans for projects in North America and Asia are the areas we are interested in.”
The eurozone’s debt crisis has increased the risk of government and bank defaults, raising credit costs and pushing the region’s biggest lenders, including Spain’s Banco Santander SA and Royal Bank of Scotland Group PLC, to sell assets and boost liquidity. Miyata aims to add ¥6 trillion worth of overseas assets to his bank in next three years to help offset sluggish loan demand’s at home.
Japan’s so-called megabanks, the three biggest lenders led by Mitsubishi UFJ Financial Group Inc., have accelerated overseas lending in the past two years, as total Japanese lending shrank by 1.2 percent in 2009 and 2.1 percent in 2010.
Sumitomo Mitsui’s banking unit had increased lending abroad by 16.3 percent to ¥9.3 trillion as of Sept. 30 from a year earlier, it said last month. That compares with the bank’s overall lending balance of ¥57 trillion, a 0.6 percent decline from a year earlier.
Bank of Ireland agreed to sell part of its project finance loans to Sumitomo Mitsui for €590 million ($763.5 million), the Irish lender said in a statement on Nov. 28. The loans relate to a portfolio of infrastructure and energy assets across North America and Europe, according to the statement.
Sumitomo Mitsui’s overseas assets, mostly loans, totaled $122 billion as of Sept. 30.
London-based HSBC Holdings PLC said last week it will sell its Japanese private banking business to Credit Suisse Group AG in an effort to reduce expenses and prepare for tighter capital rules. Piraeus Bank SA, the fourth-biggest Greek lender, hired Barclays Capital to advise on the sale of its Egyptian unit.
Mitsubishi UFJ last month agreed to buy Royal Bank of Scotland Group PLC’s Australia-based infrastructure advisory business, following the lender’s £3.9 billion ($6.1 billion) acquisition in 2010 of RBS’s project financing assets.
Sumitomo Mitsui will also consider buying an entire business unit from a European bank, said Miyata. While he did not elaborate on specific targets, the bank’s brokerage unit offers expansion opportunities as Japanese companies tap the strong yen to buy operations abroad, Miyata said. He predicts the yen will trade around ¥78 to the dollar next year.
The currency has risen 4.9 percent against the dollar this year to ¥77.7 Thursday in Tokyo. The euro depreciated to as low as ¥100.36, the lowest since 2001.
The bank’s SMBC Nikko unit started merger and acquisition advisory operations in Shanghai in January to win business from Japanese firms moving to faster-growing overseas markets, he said.
Japanese acquisitions abroad have climbed to about $88 billion this year, the most in any of the 12 years for which Bloomberg data is available, and more than double last year’s. Cross-border deals this year include Takeda Pharmaceutical Co.’s $13.7 billion acquisition of Swiss drugmaker Nycomed.
Miyata also said Sumitomo Mitsui, Olympus Corp.’s biggest shareholder, will maintain support for the world’s largest endoscope maker and help it keep its global lead, as the camera maker reels from a $1.7 billion accounting fraud.
“Olympus has developed one of Japan’s most vital technologies,” Miyata said in the same interview. “We’ll stand by the company as its most intimate lender because it is important to protect the technology, where Olympus has 70 percent of the market.”
Miyata’s remarks follow those of Katsunori Nagayasu, chairman of the Japanese Bankers Association, on Dec. 15 expressing continued lender support for the manufacturer. Japanese prosecutors raided Tokyo-based Olympus’ offices on Dec. 21, more than a month after the company admitted to hiding investment losses over more than a decade.
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