Sumitomo to launch 5.7bn rights issue

JAPAN’S second largest bank by market value, Sumitomo Mitsui Financial Group, yesterday announced a giant £5.7bn share sale, buoyed by strong demand from overseas and domestic investors.

The Japanese mega-bank said it will raise 923.1bn yen (£5.7bn) by issuing new common shares, making it one of the biggest fundraisings in Japanese corporate history.

The bank plans to sell 235m shares at 3,928 yen each, a 9.7 per cent discount to Friday’s closing price. The fundraising will dilute existing shareholders’ stakes by 30 per cent.

Daiwa Securities SMBC and Goldman Sachs will underwrite the transaction, and after fees, Sumitomo looks set to pocket in total 885bn yen.

Shares of Japanese banks have risen about 45 per cent in the last three months, recovering from a six-year low earlier in March.

The fundraising will be seen as an extension of the bank’s aggressive attempt to grab market share at home by beefing up its securities business. In May, Sumitomo made a winning bid for Citigroup’s Japanese brokerage.

Sumitomo Mitsui posted a much greater than expected 390bn yen net loss due to the economic turmoil during the year ending 31 March, far off the 180bn yen profit it had projected and the 462bn yen profit it made the previous year.

But economists now believe that the worst is over for the Japanese economy as the country’s three largest banks, Sumitomo, Mitsubishi UFJ and Mizuho Financial are all forecasting a return to profit this year after reporting combined losses of around 1.22 trillion yen last year.