SMFG to Raise Capital, Mizuho Eyes Ties with BofA in Asia

Mizuho Financial Group | Sumitomo Mitsui Financial Group, Inc.
Reuters | 19 Nov 2008 | 12:51 AM ET


Sumitomo Mitsui Financial Group aims to raise about 400 billion yen (US$4.12 billion) in preferred securities, a newspaper said, becoming the latest Japanese bank to bolster its capital amid the financial crisis.

Katsumi Kasahara / AP

Once thought to be relatively unharmed by the global credit crisis, Japanese banks are now scrambling to raise cash, as an economy in recession and over-exposure to plunging domestic stocks sap their capital.

SMFG, Japan's third-largest bank, will issue the funds to finance the redemption of outstanding preferred securities and also beef up a capital base being sliced into by a rise in bad loans, the Yomiuri newspaper reported on Wednesday.

The bank, which said last week that it had no plans to follow its rivals in raising capital, could announce the funding plan as early as Wednesday. SMFG responded to the Yomiuri report with a statement saying it had not made a decision to raise capital.

Shares in SMFG were down 5.9 percent at 321,000 yen as of the midday break, underperforming a 4.1 percent fall in Tokyo's banking subindex.

The country's two largest banks, Mitsubishi UFJ Financial Group and Mizuho Financial Group, have announced plans to raise up to about $13 billion between them to shore up their balance sheets.

Japan's banks have also been hurt by the tumble in Japanese stocks because they hold big stakes in their business corporate clients as a means to cement ties.

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Last week SMFG posted a 51 percent fall in quarterly profit, hit by a rise in bad loans as Japan's economy slipped into recession.

Mizuho could boost ties with BofA in Asia

Mizuho Financial, Japan's second-largest bank, could strengthen cooperation with Bank of America [BAC 15.19 0.16 (+1.06%) ] in Asia, although it is not considering a capital tie-up now, the vice-president of Mizuho's corporate lending arm said on Wednesday.

The bank is also seeing a sharp increase in business with global, non-Japanese firms such as Volvo, as the credit crisis has waylaid many overseas banks, Yasuhiro Sato, deputy president of Mizuho Corporate Bank, told Reuters in an interview.

Mizuho injected $1.2 billion in U.S. investment bank Merrill Lynch [MER 11.40 -0.38 (-3.23%) ] in January. Hit hard by subprime losses, Merrill is now due to be taken over by Bank of America later this year.

Given the Merrill investment and a previous relationship with Bank of America, Sato said the two banks could work together in Asia, where Bank of America has little presence, in areas such as asset management.
Copyright 2008 Reuters.