Sumitomo Mitsui Financial Group (SMFG) has significantly increased its stake in Jefferies Financial Group to 10.9%, more than doubling its previous 4.5% holding. This move is part of SMFG’s strategy to strengthen its investment banking presence, aiming to match the achievements of its domestic competitors.
The strategic alliance between SMFG and Jefferies, established in July 2021, originally concentrated on U.S.-based cross-border mergers and acquisitions, particularly involving Japanese corporations. Since fiscal 2023, the partnership has broadened to include investment-grade company coverage in the U.S., expanding its scope to nearly 100 projects in equity and debt capital markets over the past year.
As Japanese businesses face a shrinking domestic market, their interest in cross-border acquisitions has grown, prompting banks like SMFG to acquire expertise and increase revenue through such deals. With President Toru Nakashima now serving on Jefferies’ board, SMFG aims to develop a robust U.S. investment banking operation around Jefferies.
SMFG plans to double its net business profit from overseas brokerage operations to 49 billion yen ($332 million) by fiscal 2025. It has also announced intentions to increase its stake in Jefferies to 15% by 2025, potentially turning the U.S. firm into an equity-method affiliate. Meanwhile, SMFG’s Japanese rivals, Mitsubishi UFJ Financial Group and Mizuho Financial Group, have already established strong positions in the U.S. investment banking sector.
While SMFG continues to acquire nonvoting preferred shares in Jefferies, the depth of the partnership and its future implications remain to be seen, especially as potential interest rate cuts by the U.S. Federal Reserve could impact the investment banking landscape.
