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Aozora, Sumitomo agree on broad tieup
Sumitomo Trust & Banking Co. and Aozora Bank said Tuesday they have agreed to tie up in a broad range of businesses, including real estate, to boost their competitiveness by utilizing each other's business knowhow. Sumitomo Trust, Japan's fifth-largest banking group, and Aozora Bank, the successor to the once-nationalized Nippon Credit Bank, will launch joint operations in real estate, trust and asset management by around the end of March, the two banks said. They also said they are looking into expanding their cooperation into other areas. This will be the first comprehensive business alliance between major Japanese banks since the 2004 tieup between Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. Mitsubishi Tokyo Financial and UFJ Holdings later merged into Mitsubishi UFJ Financial Group Inc. Both Sumitomo Trust and Aozora Bank denied the possibility of the business alliance developing into an integration of their operations. A Sumitomo Trust executive also ruled out forming a capital tieup between the two banks. But the latest move could trigger another realignment in the industry. The move came after Aozora Bank formed an alliance with Bank of Yokohama in May in the field of investment banking as part of its efforts to strengthen the relationship with regional banks. In the real estate-related field, real estate-backed loans by First Credit Corp., a Sumitomo Trust group credit company, will be available for Aozora Bank customers, the banks said. Aozora Loan Services Co., an Aozora Bank group debt collector, will help rehabilitate troubled corporate customers of Sumitomo Trust, they said. In the trust business, Sumitomo Trust will provide stock transfer agent and pension trust services to Aozora Bank's corporate customers while offering testamentary trust services to its individual customers, they said. The two banks will also aim to strengthen their asset management business through cooperation between the asset management and securities companies of their groups, they said. They will cooperate to sell their financial products, including investment trusts, to regional financial institutions. "It makes a lot of sense because Aozora hasn't been a very successful commercial bank," said Neil Katkov, Tokyo-based Asia research manager at Celent LLC, a financial consultancy. "Any way that banks can consolidate makes sense and it could be the start of something more." The proposed tieup with Aozora also comes after Sumitomo Trust failed to acquire UFJ Trust Bank Ltd. in 2004 because Mitsubishi Tokyo Financial Group Inc. acquired UFJ Holdings Inc. to form Mitsubishi UFJ Financial Group Inc., now the nation's biggest bank. "Sumitomo Trust is trying to expand in any business that is related to its existing operations," said Shinichi Tamura, a banking analyst at UBS Securities Japan Ltd. in Tokyo. "If they merge or enter an alliance, they could work together in real estate, capital management and private equity businesses." Japanese banks have been hit as they struggle to grow lending margins with interest rates still near zero percent in Japan and as rising defaults on U.S. mortgages to riskier borrowers continues to cause turmoil in global credit markets. Last week, Aozora said it expects its full-year profit to drop 23 percent to ¥62.6 billion after writing down the value of investments related to U.S. home loans and on lower income from bond trading. Sumitomo Trust also reported a 41 percent fall in first-half profit to ¥38 billion last week on higher provisions for bad loans, including defaults on U.S. mortgages. Article from The Japan Times No one has commented on this article. |
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