SMFG leads Japan’s second wave of global M&As

The strong yen, a bane for Japanese exporters, is proving a gold mine for Japanese banks intent on mergers and acquisitions aboard, especially in Europe.

Sumitomo Mitsui Financial Group, Japan’s second-largest bank by market capitalization, intends to increase its overseas assets by US$78 billion over the next two years to counterbalance weak domestic loan demand. The bank’s overseas assets amounted to US$127 billion in 2011.

In the space of slightly over a month, SMFG has bought RBS Aviation Capital based in Dublin, Ireland and has taken part ownership of Moelis and Company, a five-year old U.S. financial adviser whose value lies in its information about M&As.

RBS Aviation Capital, a subsidiary of the Royal Bank of Scotland, is the seventh-largest aircraft lessor in the world by fleet size and operates 246 jets. The firm is being acquired by SMFG for US$7.3 billion. RBS expects the sale will be completed before the end of Q3.

SMFG will pay US$93 million for a 5% stake in Moelis, a global investment banking and merchant banking firm. The firm provides advisory services related to M&As, recapitalization and restructuring, capital markets advisory and risk advisory.

SMFG’s renewed globalization, and those of the other top Japanese banks, is widely seen as the “Second Wave” of Japanese M&As after the First Wave that resulted in a large number of significant acquisitions in the 1980s.

Today, SMFG’s plan is to increase overseas assets by nearly 60% and raise the percentage of overseas banking profits from 26.8% at the end of 2011 to 30% by the end of March 2014.

“We can’t grow if we just stay in Japan,” said Yoshihiro Hyakutome, general manager of the global business strategy department of Sumitomo Mitsui Banking Corporation, the bank at the core of SMFG.