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Sumitomo Mitsui forms US investment banking group

A file photo of Yoshihiko Shimizu, President and CEO Of SMBC Nikko Securities. Photo: Reuters

A file photo of Yoshihiko Shimizu, President and CEO Of SMBC Nikko Securities. Photo: Reuters

Tokyo: Sumitomo Mitsui Financial Group Inc. formed an investment-banking group in the US, part of a push to expand its mergers advisory business even as competitors from Nomura Holdings Inc. to Goldman Sachs Group Inc. move to curtail costs.

The Tokyo-based bank’s brokerage unit hired Randy Gelber from Barclays Plc to lead the group starting Monday, said Yoshihiko Shimizu, chief executive officer of SMBC Nikko Securities Inc. It’s the first time the firm will have a team that will originate deals in the Americas, he said. The bank will hire fewer than 10 senior bankers from competitors in coming months to build the team, executive managing director Taneki Ono said in an e-mail.

Sumitomo Mitsui joins fellow Japanese megabank Mizuho Financial Group Inc. in expanding investment banking in the US while tougher regulations and market volatility prompt firms including Nomura to pull back. Sumitomo Mitsui has had an alliance with American investment bank Moelis & Co. on cross-border mergers and acquisitions advice since 2011. Like Mizuho, it’s seeking to boost fee income abroad by leveraging relationships with corporate clients.

“We’re very keen to do M&A advice, and the new team will collect intelligence to originate and execute deals,” Shimizu, 60, said in an interview in Tokyo on 12 April. “More foreign firms will buy Japanese companies because they’re eager to obtain their technologies.”

Gelber experience

Gelber has more than 20 years’ experience in investment banking, most recently as head of technology services at Barclays in New York. He has also worked as head of technology, media and telecom for the UK bank in the Asia-Pacific region.

Nomura, Japan’s biggest brokerage, plans to cut 20 investment-banking positions in the US as it scales back leveraged financing for buyout deals there, people familiar with the matter said last week. The company is retreating from European equities and trimming businesses in the US, a move that could lead to 1,000 job losses, people said.

Goldman Sachs is embarking on its biggest cost-cutting push in years as it tries to weather a slump in trading and dealmaking, according to two people with knowledge of the effort.

Chasing MUFG

Mizuho, meanwhile, is seeking to expand the number of professionals in North America by at least 10% this year. In 2015, the Tokyo-based bank bought assets from Royal Bank of Scotland Group Plc and brought on about 130 of its bankers in the US.

Shimizu singled out Mitsubishi UFJ Financial Group Inc. as its biggest competitor in the M&A advisory business. MUFG’s joint venture with Morgan Stanley was the top adviser for Japanese acquisitions in 2015, followed by Nomura and Sumitomo Mitsui, data compiled by Bloomberg show.

“As a capitalist, I think there is no way to compete neck-and-neck with overseas players globally without catching up with Japan’s No. 1 financial firm, which is MUFG,” Shimizu said. “To grow further as a financial group, we need to expand our direct finance businesses” to complement traditional bank lending, he said.

Sumitomo Mitsui’s banking unit said in 2012 it will invest $93 million in New York-based Moelis to strengthen the mergers advice tie-up, which will remain intact after the Japanese bank’s latest move.

US opportunity

“We believe there is a significant opportunity to grow our business in the region,” said Ono, a former partner at Goldman Sachs.

Shimizu also said SMBC Nikko plans to increase the number of retail brokers in Japan from 2,000 to 3,200 by March 2019 to bolster business for individual investors. By strengthening its investment banking and global operations, the firm will be able to provide attractive financial products, he added.

The brokerage had 9,677 employees in Japan as of December, a 4% increase from a year earlier. Its staff abroad in Hong Kong, Singapore, New York and London increased 18% to 413, according to its financial statements. Bloomberg