Banks like Sumitomo Mitsui Financial Group are thought to be accelerating their foreign acquisitions in the US and Asia in order to deliver better shareholder returns and bigger profits, according to the Financial Times.
Alongside Sumitomo, Mitsubishi UFJ Financial Group (MUFG) are set to acquire large wholesale commercial banking or debt capital markets businesses and Mizuho are interested in asset management companies.
A source told the FT that this focus on business areas such as syndicated loans and debt capital markets is because profits are made regardless of the language or cultural differences between buyer and target.
Talks of the interest rate rise in the US could also provide a springboard for acquisitions, as analysts believe that this will cause global market turmoil but the Japanese are determined to identify risks beforehand and use this as an opportunity.
Japan has been attempting to balance their slow home market with acquisitions for many years and growing a business by purchasing abroad seems like a good option for Japanese insurers also, according to the FT.
Ken Takamiya, chief Japan banks analyst at Nomura says that foreign acquisitions should be done in countries that are receiving similar pressure for shareholder return from investors, like the US and other countries in Asia. “It is clear from their comments that the big banks are considering overseas acquisitions as an option. They would probably prefer deals of a size that comes within their cashflow generation, given strong pressure from investors for shareholder return,” said Takamiya.
Earlier this year, it was reported that Mizuho bought US loans from the Royal Bank of Scotland and MUFG bought a large stake in one of Thailand’s biggest lenders, Bank of Ayudhya for Y560 billion in 2013.
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