Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second-biggest lender by market value, will boost its brokerage staff by 11 percent as it aims to win customers from Nomura Holdings Inc. (8604), the country’s top investment bank.
SMBC Nikko Securities Inc. will increase its workforce by 800 employees within three years, including at least 200 mid- career workers and the transfer of 150 staff from Sumitomo Mitsui Banking Corp., Chief Executive Officer Koichi Miyata said in an interview on May 27.
Miyata, 57, is diversifying Sumitomo Mitsui’s businesses away from dependence on banking amid 18 straight months of domestic loan declines. The Tokyo-based lender’s brokerage business plans to “catch up” with Nomura, which held 40 percent of Japan’s 5 trillion ($62 billion) equity underwriting market last year, within the next decade, he said.
“Underwriting share sales, together with financial support for Japanese companies launching overseas business, is one of our main focuses,” Miyata said. “It’d take 10 years for us to expand our global network like Nomura’s.”
Mizuho Financial Group Inc. (8411), Japan’s third biggest bank by market value, and Goldman Sachs Group Inc. (GS) were Nomura’s closest competitors in Japan equity underwriting last year, according to data compiled by Bloomberg.
Sumitomo Mitsui, ranked 10th, won a 2.1 percent share of the market. SMBC Nikko employed 6,975 workers as of March 31, according to its website. The unit plans to recruit 430 graduates in the year starting next April, compared with 493 this year. Sumitomo Mitsui bought Nikko Cordial Securities Inc., the predecessor of SMBC Nikko, from Citigroup Inc. in 2009.
“Expanding SMBC Nikko’s business will make it a pillar of future growth,” said Yoshinobu Yamada, a Tokyo-based analyst at Deutsche Bank AG, noting that the unit currently contributes about 5 percent of Sumitomo Mitsui’s net income. “The key is that megabanks should understand risks in the brokerage business are different from those in banking.”
Sumitomo Mitsui rose 0.5 percent to 2,306 yen at 10:45 a.m. on the Tokyo Stock Exchange. The shares have declined 20 percent this year, compared with a 17 percent drop in the 83-member Topix Banks Index. (TPNBNK)
To lure business from bigger investment banks, Sumitomo Mitsui plans to leverage relationships with existing corporate borrowers, Miyata said. The group introduced 4,500 of its business customers to the brokerage unit last year, he said.
Using a similar strategy, Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded bank, is also targeting investment banking for growth. Its joint venture with Morgan Stanley (MS) ranked 12th in Japanese equity underwriting last year, according to Bloomberg data.
Mitsubishi UFJ clinched a deal in April to increase its stake in the New York-based bank to help make up for declining loan demand at home, which fell 0.8 percent from a year earlier to 393 trillion yen in May.
Sumitomo Mitsui Banking is targeting profit of 150 billion yen from Asia excluding Japan in the next three years, Takeshi Kunibe, chief executive officer of the unit, said in a separate interview on May 27. That would be an increase of about 50 percent, he said.
“India, Malaysia and Indonesia are the countries where we can further expand our bases,” said Kunibe, 57. “In China, we have 15 offices now, and several more candidate cities there.”