SMBC Group


Sumitomo Mitsui Financial Group, Inc., initialed as SMFG until 2018 and SMBC Group since, is a major Japanese multinational financial services group and holding company. It is the parent of Sumitomo Mitsui Banking Corporation, SMBC Trust Bank, and SMBC Nikko Securities. SMBC originates from the 2001 merger of Sumitomo Bank with the Sakura Bank, itself a successor to the Mitsui Bank, and the group holding entity was created in December 2002 after which SMBC became its wholly owned subsidiary.
SMBC Group operates in retail, corporate, and investment banking segment worldwide. It provides financial products and services to a wide range of clients, including individuals, small and medium-sized enterprises, large corporations, financial institutions and public sector entities. It operates in over 40 countries and maintains a presence in all International Financial Centres as the 12th biggest bank in the world by total assets. It is one of the largest global financial institutions in project finance space by total loan value. It is headquartered in the Marunouchi neighborhood of Tokyo.
SMBC Group is the second-largest of Japan's three so-called megabanks, with $2 trillion of total assets at end-March 2023, behind Mitsubishi UFJ Financial Group and just ahead of Mizuho Financial Group. As of 2024, SMBC group was listed as 63rd largest public company in the world according to Forbes Global 2000 ranking. It is considered a systemically important bank by the Financial Stability Board.

History

SMBC was formed by the merger of the Sumitomo Bank and Sakura Bank in April 2001. Its history could be viewed as going back to 1683, the date of first documented banking operations by Mitsui Takatoshi. The group's two main historical components, Mitsui Bank and Sumitomo Bank, were established as modern private banks in the Meiji era, in 1875 and 1895 respectively. SMBC Group also incorporates several of the National Banks in Meiji Japan which were numbered in accordance with their chronological date of establishment until 1880:
  • the 5th National Bank, est. 1875 in Osaka, formed by former Samurai from the Satsuma Domain and merchants from Northern Kyushu, later relocated to Tokyo and merged 1898 into the 32nd Bank ;
  • the 15th National Bank, est. 1877 in Tokyo, reorganized 1897 as, collapsed 1927 in that year's financial crisis, eventually merged 1944 into Teikoku Bank;
  • the 32nd National Bank, est. 1878 in Osaka, merged 1920 into the Fifteenth Bank;
  • the 38th National Bank, est. 1878 in Himeji, merged 1936 with several other local banks to form the, itself merged 1973 with Taiyo Bank to form Taiyo Kobe Bank;
  • the 51st National Bank, est. 1878 in Kishiwada, merged 1940 with several other banks to form Hannan Bank, itself merged 1945 into Sumitomo Bank;
  • the 55th National Bank, est. 1878 in Izushi, merged 1928 with Tajima Bank, which itself was absorbed by the Bank of Kobe in 1945;
  • the 56th National Bank, est. 1878 in Akashi, later Goroku Bank, another participant in the merger that formed the Bank of Kobe in 1936;
  • the, est. 1878 in Kurume, acquired 1912 by Sumitomo Bank;
  • the, est. 1878 in Tottori, acquired 1928 by Kobe Okazaki Bank which was another of the banks that formed the Bank of Kobe in 1936;
  • the 94th National Bank, est. 1878 in Tatsuno, absorbed 1917 by the 38th Bank;
  • the 106th National Bank, est. 1878 in Saga, acquired 1941 by Sumitomo Bank;
  • the 131st National Bank, est. 1879 in Kasukabe then relocated to Kano, merged 1881 into the 32nd National Bank;
  • the 137th National Bank, est. 1879 in Sasayama, split 1942 into two banks, one of which was absorbed by the Bank of Kobe;
  • the 142nd National Bank, est. 1879 in Chōshi, merged 1881 into the 32nd National Bank.
At the time of the merger, the combined entity was of similar size to Deutsche Bank and to the pending merger that would soon form Mizuho Bank.

Early years

The newly created bank was plagued with bad assets from the Japanese banking crisis. This led to several corporate actions taken by SMBC to clean up its balance sheet and raise capital, including writing off non-performing loans and selling its stake in Goldman Sachs.
SMBC announced on July 30, 2002 that it would establish a holding company by December and reorganize three related companies, its subsidiary Sumitomo Mitsui Card Company, Sumitomo Mitsui Bank Leasing, and The Japan Research Institute, a sister think tank, as subsidiaries of the holding company. The holding company had a capital of 1 trillion yen, and SMBC CEO Takashi Nishikawa and Chairman Akira Okada each served as president and chairman of the holding company.
In July 2002, SMBC announced that it would repay 2,000 billion yen of public funds, which had been accepted in the form of perpetual subordinated bonds. The funds were part of a total of 1.5 trillion yen that had been injected into the Japanese banking system following the financial crisis of the late 1990s. In 2005, SMBC announced a three-year repayment plan, and in October of that year, it repaid an additional 323.6 billion yen. SMFG initially targeted repaying all of its public funds by the end of the 2006 fiscal year. Mitsubishi UFJ Financial Group and Mizuho Financial Group also had the same goal. These moves were due to a number of factors, including the active resolution of non-performing loans, which had stabilized the financial system, and the increased repayment capacity of the banks. The Financial Services Agency had also encouraged banks to repay their funds early, and some banks, which were reluctant to have their management interfered with by the authorities, had responded.
In December 2002, SMBC began considering a takeover of the Aozora Bank, which was established after the collapse of the former The Nippon Credit Bank. The Aozora Bank President Hiroshi Maruyama expressed reservations about the proposal, as it would have made it difficult for the bank to go public and repay public funds from the proceeds of the IPO. SMBC competed with a joint venture between the US investment firm Cerberus and the German bank HypoVereinsbank, and the US financial company GE Capital. The offer price was about 100 billion yen, and Cerberus also offered the same amount. However, Cerberus, as a major shareholder of Aozora Bank with a 12% stake, had the right to purchase the bank first if the offer price was the same as that of the other bidders. In April 2003, Cerberus announced the acquisition of the Aozora Bank.
In March 2003, SMBC initiated a reverse merger with its subsidiary, Wakashio Bank, to secure financial resources to cover large deferred losses from its equity holdings. Although SMBC was technically dissolved and Wakashio Bank became a company that survived, under the Japanese Commercial Code, the surviving entity took the name Sumitomo Mitsui Banking Corp., just like the disbanded bank name. SMBC President Yoshifumi Nishikawa and chairman Akishige Okada became president and Chairman of the new entity respectively. Hiroyasu Ichikawa, President of Wakashio Bank, assumed the position of senior managing director. The purpose of the merger was to generate about 2 trillion yen in book profits by making the Wakashio Bank the surviving company, and to eliminate the hidden losses of SMBC, such as those on stocks. The profit, then, was used to accelerate write-offs of the bank's unrealized securities losses and boost sales of its shareholdings to reduce risk from the fluctuation of stock prices. Post the merger, the new entity grew rapidly through organic and inorganic growth strategy. The assets expanded from 102.4 trillion yen in 2003 to more than 200 trillion yen by the end of 2019, making it the 12th largest bank in the world.
On July 14, 2004, UFJ Holdings announced that it had decided to enter into negotiations with Mitsubishi Tokyo Financial Group for a management integration. In response, on July 30, SMFG announced that it had made a management integration proposal to UFJ. On August 8, it was reported that SMFG had sent a formal proposal document summarizing the detailed terms of the integration plan to MTFG. In response to MTFG's plan to provide an investment of approximately 500 billion yen, SMFG said that it would invest at least 500 billion yen and up to 700 billion yen. SMFG proposed a merger ratio of "1 to 1." The recent stock prices of SMFG and UFJ were 1 to 0.77 on average over the past six months, which was an exceptionally favorable condition for UFJ shareholders. However, in February 2005, MTFG and UFJ signed a merger agreement with a merger ratio of "1 to 0.62." SMFG officially decided to withdraw its management integration proposal to UFJ and notified UFJ in writing. On January 1, 2006, MTFG and UFJ Holdings merged to form Mitsubishi UFJ Financial Group. While SMBC eventually lost the contest, it was credited with increasing competition within Japan's once staid banking industry.
In February 2005, it was revealed that SMFG was in negotiations with Daiwa Securities Group, with a view to a possible merger of the two companies. The two groups had already established a joint venture, Daiwa Securities SMBC, a specialist in corporate transactions, but they were considering merging their holding companies to achieve a complete integration of the groups as a whole. They hoped to achieve this as early as the 2005 fiscal year. However, on April 8, Daiwa Securities Group Holdings President Shigeharu Suzuki said, "There are no benefits to a merger at this time, and we have no plans to begin negotiations with Sumitomo Mitsui Financial Group."
In September 2006, SMFG acquired SMBC Friend Securities, which was a majority-owned subsidiary of SMBC with a 40% stake.
SMFG announced on October 17, 2006, that it had repaid all of its public funds. MUFG repaid the funds it had inherited from its predecessor, UFJ Bank, in June. MHFG repaid its public funds in July, which had once approached 3 trillion yen. SMFG had initially targeted repaying its public funds by the end of the fiscal year, but it moved up the repayment schedule out of concern that it would be "half a lap behind" the other megabanks.
In December 2006, SMFG announced that it would consolidate its headquarters functions in the Ōtemachi district of Tokyo. Since the merger in 2001, SMFG had its head office in the former Mitsui Bank building in Hibiya, with some headquarters functions in Marunouchi. The new headquarters is located next to the former Sumitomo Bank building, and the move was completed in October 2010. SMFG President Masayuki Oku said, "By consolidating our headquarters, we can improve efficiency and realize advanced and fast-paced operations."