Japan's SMFG Eyes Larger Stake in US Investment Bank Jefferies

Japan's Sumitomo Mitsui Financial Group is considering raising its stake in Jefferies Financial Group as the two expand their partnership beyond the U.S., SMFG President and CEO Jun Ohta told Nikkei.

"I have a wish to move toward increasing our holdings," Ohta said.

Ohta gave no details about the size or timing of the additional investment, and indicated that such decisions would come once SMFG undertakes discussions with U.S.-based Jefferies and American regulators. But he said he hopes to make Jefferies an equity-method affiliate.

Under a capital tie-up announced in July 2021, SMFG acquired just under 5% of Jefferies' outstanding shares for around 40 billion yen ($302 million at current rates) through Sumitomo Mitsui Banking Corp.

SMFG and Jefferies have cooperated in the U.S. in areas such as merger and acquisition advisory services, and recently pursued joint deals in Europe. They also plan to cultivate Asian markets such as India.

"We'll reach customers by combining our banking customer base and balance sheet with Jefferies' securities know-how," Ohta said.

The additional stake in Jefferies is part of an effort by SMFG to expand its overseas brokerage business amid the ongoing decline of traditional banking in Japan.

Ohta has long expressed concern about the group's relative weakness in this area compared with its peers. Mitsubishi UFJ Financial Group earns nearly 40% of its profits from Morgan Stanley, an equity-method affiliate, while Mizuho Financial Group is expanding aggressively in the U.S. and elsewhere.

(Source: Nikkei Asia)