Sumitomo Mitsui Financial Group Inc., Japan’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 yen ($90 billion) in offers from European banks including infrastructure project loans, Koichi Miyata, Sumitomo Mitsui’s president, 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 euro area’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 yen worth of overseas assets to his bank in next three years to help offset sluggish Japanese loan demand.
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 the country’s total lending shrank by 1.2 percent in 2009 and 2.1 percent in 2010.
Sumitomo Mitsui’s banking unit increased lending abroad by 16.3 percent to 9.37 trillion yen as of Sept. 30 from a year earlier, it said last month. That compares with the bank’s overall lending balance of 57 trillion yen, a 0.6 percent decline from a year earlier.
Shares of the bank rose 0.9 percent to close at 2,144 yen on the Tokyo Stock Exchange today, the last trading day of the year. The stock declined 26 percent in 2011.
Bank of Ireland agreed to sell part of its project finance loans to Sumitomo Mitsui for 590 million euro ($764 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.
France’s BNP Paribas SA and Societe Generale SA, Belgium-based Dexia SA and KBC Groep NV, and Italy’s Intesa Sanpaolo SpA and UniCredit SpA are among lenders seeking buyers for project finance and corporate loans in the Middle East, five bankers who were approached with deals said, declining to be identified because the information is private. The offers were made over the past six months, they said.
Mitsubishi UFJ last month agreed to buy Royal Bank of Scotland Group Plc’s Australia-based infrastructure advisory business, following the Japanese lender’s 3.9 billion-pound ($6.1 billion) acquisition in 2010 of RBS’s project financing assets.
Sumitomo Mitsui would also consider buying an entire business unit from a European bank, said Miyata. While he didn’t 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 yen to the dollar next year.
The currency has risen 4.6 percent against the dollar this year to 77.6 yen today in Tokyo.
The bank’s SMBC Nikko unit started merger and acquisition advisory operations in Shanghai in January to win business from Japanese companies 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.