Dec. 11 (Bloomberg) -- Sumitomo Mitsui Financial Group Inc., Japan’s third-largest bank, will sell 538.2 billion yen ($5.8 billion) of preferred securities to bolster its finances as it contends with rising defaults and investment losses.
The company plans to sell the securities this month, it said in a statement to the Tokyo Stock Exchange today. The bank also aims to sell additional securities early next year to raise a total of 700 billion yen, a person familiar with the matter said earlier, declining to be identified.
Sumitomo Mitsui increased its fund-raising plan from 400 billion yen as Japanese stocks head for their worst year on record, causing investment losses to balloon. Japanese banks are raising more than a combined $30 billion to replenish capital eroded by stock losses and a deepening recession that’s driving bad loans higher.
“Their capital base is hurt by rising credit costs and stock-market declines,” said Kristine Li, a Tokyo-based analyst at KBC Securities who has a “sell” rating on Sumitomo Mitsui. “So far, the financial market in Japan has stayed intact compared to the outside world, but it seems like we’re seeing a bit of a crunch here now.”
Sumitomo Mitsui rose 7.1 percent to 334,000 yen as of 2:15 p.m. in Tokyo. The 84-stock Topix Banks Index tracking Japanese lenders gained 3.8 percent. Sumitomo Mitsui decided to expand the fund-raising partly because of greater-than-expected demand from investors for securities it was selling, one person familiar with the matter said. Nikkei English News reported the plan earlier, saying the bank wanted to secure additional funds so it can expand loans.
Australia, Korea Lending by Japanese banks accelerated in November at the fastest pace in more than 16 years, as the global credit squeeze shut down other funding avenues, forcing more companies to turn to banks for money. Banks across Asia are taking steps to bulk up their finances as the credit market crisis morphs into a global recession.
Commonwealth Bank of Australia, Westpac Banking Corp. and Australia & New Zealand Banking Group Ltd. raised $5.7 billion this week selling stocks and bonds to boost balance sheets dented by rising defaults. In Korea, Kookmin Bank, Shinhan Bank and Hana Bank are getting cash from their parent companies after capital- adequacy ratios at the nation’s lenders fell.
Sumitomo Mitsui’s net income slumped 51 percent in the fiscal first half ended Sept. 30 to 83.3 billion yen, as bad-loan costs more than doubled. The company invested 500 million pounds ($740 million) in U.K. lender Barclays Plc in July. The investment has lost almost half its value as the London-based bank agreed to sell about a third of itself to investors in the Middle East to meet new capital requirements.
Source: www.bloomberg.com