Sumitomo Mitsui Financial Group said Tuesday it has reached a basic agreement with major British bank Royal Bank of Scotland Group PLC to acquire the bank’s aircraft-leasing subsidiary, RBS Aviation Capital.
The parent of megabank Sumitomo Mitsui Banking Corp. said it is seeking to complete the transaction this spring for the leasing firm, which has a large fleet of commercial aircraft and assets totaling $7.2 billion (¥550 billion).
The acquisition will be conducted by three of the Sumitomo group’s key arms — SMBC, Sumitomo Mitsui Finance and Leasing Co., and trading house Sumitomo Corp., SMFG said, adding the three firms will pay some ¥100 billion for all of the shares of the Dublin-based leasing company.
The deal signifies the biggest acquisition of a European financial institution by a Japanese bank since the European financial crisis began.
European financial institutions, whose health is deteriorating amid the sovereign debt crisis, are scrambling to sell off their assets to strengthen their capital bases.
Sumitomo Mitsui fended off competing offers from China Development Bank Corp. and Wells Fargo & Co. for the assets, which RBS is selling as it reverses a decade of expansion.
Led by President Koichi Miyata, the lender is eyeing assets held by European banks to expand abroad as economic stagnation and low interest rates curtail profitability from domestic lending.
“It’s positive to see Sumitomo Mitsui obtain a business of this type, which generates higher profit margins than operations in its home market,” said Yoshinobu Yamada, an analyst at Deutsche Bank AG in Tokyo. “Japanese banks will be significant players in acquisitions of European assets going forward.”
RBS, which received the biggest bank bailout in the world, is closing units and cutting more than 34,500 jobs. The disposal is RBS’s biggest since it received the £45.5 billion ($70 billion) government rescue.