Japan’s Sumitomo Mitsui Financial Group, Inc (SMFG) has reached an agreement with Singapore’s Fullerton Financial Holdings Pte Ltd (FFH), a subsidiary of Temasek Holdings to buy a 74.9% share in its unit Fullerton India Credit Company Limited (FICC) for around $2bn. SMFG aims to buyout the entire 100% stake in the Indian arm, which has more than 650 branches, at a later stage subject to regulatory approvals. SMFG is Japan’s second largest lender by assets and is seeking expansion opportunities outside the nation with a slow-growing domestic market. FICC offers loans to individuals and small businesses and could gain value by leveraging digital banking synergies as a fully consolidated subsidiary under SMFG. The deal will result in an increase of ~JPY 300bn ($2.7bn) in the risk-weighted assets (RWA) of SMFG and have a negative 22bp impact on its CET1 ratio. President and group CEO of SMFG said, “India is one of our focus markets where we believe in its high growth potential and want to build a deeper presence”.
SMFG’s 1.05% 2023s and 2.296% 2041s were up 0.04 and 0.99 to trade at 101.34 and 95.04 respectively.