By Makiko Yamazaki and Ritsuko Shimizu
TOKYO (Reuters) – Japan’s Sumitomo Mitsui Financial Group Inc (SMFG) plans to extend its alliance with Jefferies Financial Group Inc to Europe and Asia in a drive to beef up its global investment banking business, its chief executive said.
“There is no reason to limit our partnership to the United States,” CEO Jun Ohta told Reuters in a recent interview. “We will cooperate anywhere we can,” leveraging Jefferies’ investment banking expertise and SMFG’s huge balance sheet, he said.
The second-largest Japanese lender bought nearly 5% of Jefferies shares last year to boost its leveraged finance and cross-border M&A advisory businesses in the United States. The partnership has yielded six leveraged finance deals so far.
Ohta said SMFG and Jefferies have already been working together on deals in Europe. In Asia, cooperation would be possible in India, Hong Kong, Singapore and Japan, he said.
The Japanese “megabank” has long been eager to crack the U.S. and other major overseas capital markets. Its SMBC Nikko Securities unit, formerly Citigroup’s Japanese broker and key investment banking units SMFG bought in 2009, has a limited footprint abroad.
SMFG’s bigger domestic rival, Mitsubishi UFJ Financial Group Inc, has boosted its U.S. presence through a $9 billion investment in Morgan Stanley in 2008, which gave MUFG some 20% ownership of the Wall Street bank.
“We still don’t have enough (investment banking) capabilities overseas, and it would be too costly and time-consuming to build them up on our own,” Ohta said.
He reiterated SMFG’s intention to raise its stake in Jefferies, saying that a deeper alliance would warrant a higher ownership ratio. “I’m hoping to eventually increase our stake to make it our affiliated company,” he said.
SMFG has been under agreement with the Federal Reserve to refrain from major U.S. investments since its banking arm was ordered in 2019 to improve measures against money laundering.
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by William Mallard)
