Koichi Miyata, the president of Sumitomo Mitsui Financial Group Inc., said the lender will hire more foreign managers for its overseas operations, tapping their local expertise to aid a global expansion.
“It’s natural to see locally hired foreign managers becoming the majority in a few years,” Miyata, 61, said in an interview in Tokyo on Dec. 19. “We can’t just take our Japanese brains there like we’ve been doing for a long time.”
The push by Japan’s second-largest bank to draw on foreign thinking underscores efforts by some of the nation’s biggest companies to become more outward-looking. Rakuten Inc., the owner of messaging service Viber, adopted English as its main language of business in 2010, while Nissan Motor Co. and Toyota Motor Corp. make most of their vehicles abroad.
“I want someone who understands local needs and situations best to lead overseas businesses,” Miyata said.
Ventures abroad generate a third of profits for Sumitomo Mitsui, which last year bought a $1.5 billion stake in Indonesia’s PT Bank Tabungan Pensiunan Nasional. Japanese banks are hunting for growth overseas because demand for credit is tepid at home and monetary easing under Abenomics has constricted lending margins.
Foreigners account for about 40 percent of management positions overseas in Sumitomo Mitsui’s main lending unit, according to the company, which did not give staff numbers or disclose the comparable ratio at home.
Foreigners comprised 3.8 percent of 4,153 managers at 529 Japanese companies, according to data from Tokyo-based publisher Toyo Keizai Inc. last year. In April, Sumitomo Mitsui promoted two foreigners based outside Japan to executive officer, a position shared by two other non-Japanese and 75 Japanese.
The bank’s overseas lending increased ¥1.3 trillion in the six months ended Sept. 30, according to Miyata. That is 26 percent of a ¥5 trillion goal for the three years through March 2017, meaning the lender is “well on track,” he said. Sumitomo Mitsui calculates the loan amount based on an exchange rate of ¥100 per U.S. dollar to avoid the effects of fluctuations, the company said.
“Half of the growth comes from North America and the other half comes from Asia,” said Miyata. “We want to keep focusing on these two regions. There’s demand and we can get big enough loan spreads there, unlike Japan.”
Shares of Sumitomo Mitsui have fallen 20 percent this year, compared with a gain of about 10 percent in the Topix Index.
In the U.S., where the company’s base is New York, the lender is targeting local “blue chip” companies as borrowers, as well as Japanese and other Asian corporates, Miyata said. In Asia, it plans to add “a few more” branches in India, lend to small companies in Indonesia and Singapore, and expand in nations including Vietnam and the Philippines, he said.
In Japan, lending growth is not strong enough to offset declines in margins, according to Miyata. The average net interest margin, a measure of loan profitability, at the 86 companies in the Topix Banks Index is 1.24 percent, the least in Asia, according to data based on their latest filings.
“We want to boost fee businesses such as brokerage and trust banking to make up for shrinking interest margins in Japan,” said Miyata.
He declined to comment on a possible purchase of Citigroup Inc.’s Japanese consumer banking business. Sumitomo Mitsui will buy the operations for about ¥40 billion, people with knowledge of the matter said this month.
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