Sumitomo Mitsui Financial Group (SMFG) aims to expand its business in Asia and is looking at the Philippines, India and Myanmar for possible future investment, the CEO of Japan’s second-largest bank by assets said.
SMFG, like other Japanese lenders, has been stepping up overseas investments in the past few years as it continues to face razor-thin margins at home amid an ageing population and massive central bank stimulus. Now, signs of another economic downturn are threatening to weigh on banks in the country.
“We are looking at Asian countries with growing economy and population as well as nations that have built good relations with Japan,” Jun Ota said, adding he plans to raise SMFG’s actual profit by more than 20 percent during his tenure as CEO – a job he took up in April.
Ota’s predecessor, Takeshi Kunibe, had said in December that the lender was weighing acquiring Asian commercial banks, using some of the up to $12 billion in surplus capital that the group expects to build up over the next five years.
Among Japanese banks, SMFG has led the foray into Asian markets, spending about 150 billion yen ($1.39 billion) in 2013 and 2014 to buy 40 percent of Indonesia’s mid-sized lender PT Bank Tabungan Pensiunan Nasional Tbk (BTPN). It completed the deal in February this year.
CEO Ota identified Philippines and India as its next targets, adding Myanmar could possibly be a target too.
SMFG’s bigger rival Mitusbishi UFJ Financial Group has since 2013 invested in Philippine Security Bank Corp, Thailand’s Bank of Ayudhya Pcl and Bank Danamon Indonesia.
Ota also told Reuters that he would raise the group’s actual profit to 800 billion yen during his tenure, from 650 billion yen reached over the past two years, referring to a metric that excludes certain factors including credit costs.
He did not give a specific timeframe, but analysts expect he will serve as CEO for about six years.
Japan’s three largest banks all reported lower profits for the year ended March, highlighting the challenges faced by the banking industry as the world’s No.3 economy looks to be headed for another downturn. SMFG has cautioned its net earnings will drop 4 pecent in the current financial year. (Reuters)