As nations realign themselves in a multipolar world due to rising geopolitical tensions, the Asia Pacific region will continue to serve as a core growth driver for Sumitomo Mitsui Banking Corporation, better known as SMBC.
Against this backdrop, Asean is becoming an increasingly promising manufacturing hub for MNCs including Japanese companies, as they adopt an Asia ex-China or China+1 strategy.
It is therefore not surprising that for the current fiscal year, SMBC’s business in Southeast Asia, South Asia and Oceania is expected to account for approximately 10% of the group’s total net business profit, double the 5% contribution seen in FY2017. Southeast Asia alone is expected to account for 7% of net business profit. This includes investee companies and before credit costs and taxes.
SMBC’s 1HFY2023 ended September results saw record first-half consolidated net business profit of JPY721.9 billion ($7.23 billion), up 135.8% y-o-y. Japan’s second-largest megabank attributes this to loan growth and related transactions in wholesale banking and global business, and strong performance in its payments business.
With the record results, SMBC has revised its full-year consolidated net business profit target upwards to JPY1.265 trillion from JPY1.235 trillion.
SMBC is “progressing as planned” despite today’s challenging environment, says Takeshi Kunibe, chairman of the board at SMBC since 2018. “Japan’s economy will continue to recover gradually from the pandemic. Actually, from July to September, economic growth was negative, but it’s because of the big number of imports.”
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Corporate investment in Japan continues to grow, adds Kunibe. “So, although the number was negative, the fundamental economic situation is not so bad. Even though the recovery rate is not so high, I think it continues to grow.”
Singapore is a critical market and is also home to SMBC’s Asia Pacific regional headquarters, Kunibe tells The Edge Singapore in an exclusive interview.
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Singapore growth
After 21 years at Centennial Tower, SMBC moved into its new three-storey office in CapitaSpring on Nov 17. “Over the years, we have grown to 1,200 employees. As we look ahead post-pandemic, we are proud to move into our new office after two and a half years of planning and co-creating with our employees,” says Kunibe.
According to Kunibe, SMBC’s new office is designed around three pillars: wellness, sustainability and collaboration. “From the office building selection to the use of technology, decisions were prioritised around delivering the best experience for our clients, providing our employees with flexible work styles and a bestin-class working environment and our commitment to maintaining carbon neutral operations, among others.”
The bank hopes to attract younger talent through its new space in CapitaSpring, says Rajeev Kannan, co-head of Apac at SMBC. “Only about 20% of our employees [are from] the millennial generation. In the future, it will increase so we need to have an office space that allows for a more collaborative working environment.”
SMBC also has an additional office in Changi Business Park. Singapore is but one part of SMBC’s global footprint, which includes over 27,000 employees in offices across 39 countries and regions. “Looking forward, we will continue to pursue synergies between SMBC and our portfolio companies to achieve further growth from not just our Singapore hub, but across the relevant locations and working closely with our head office teams,” says Kunibe.
Plans for Asia
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SMBC entered Singapore in 1963. “We’ve been represented in most parts of Asia for a number of years,” says Kannan. “We are going to achieve 60 years in Singapore; we are going to be 70 years old in Thailand. So, our footprint in these markets is decades-long.”
He adds: “Because of that, we have a knowledge and understanding of how to set up businesses in these countries. So, when our clients from any other part of the world — Taiwan, Korea, China — come to this part of the world, we can not only provide that capital, but actually provide solutions and ideas on how to serve the company, how to structure their business, what are the partnerships they could probably get into, and ultimately help them using our network.”
SMBC’s East Asia division also covers mainland China, Taiwan and Korea. Yuichi Nishimura, co-head of Apac at SMBC, insists there is no competition between the two Asian segments. “We are always collaborating with them; business has no border.”
Nishimura adds: “We’re not really comparing East Asia versus Southeast Asia; we are more focused on how to seamlessly collaborate. Korean companies are quite [keen] to invest in this region, including India and Australia. So, we want to be a gateway to Asean, India or Sydney, and vice versa; we always want to be a gateway to Japan.”
The Asia Pacific region continues to be one of SMBC’s most important markets, says Nishimura. He cites the bank’s “multi-franchise strategy”. “In pursuit of medium- to longterm growth in Asia, we are developing and expanding a franchise that supplies services to customers ranging from individuals to large corporations, and also strengthening our digital capabilities in Asia.”
Within Indonesia, India, Vietnam and the Philippines, SMBC’s current operations are mostly in wholesale banking. The bank is now starting to make “deeper dives” into the retail business in these countries, along with serving the smalland medium-sized enterprises (SMEs) there, adds Nishimura. “In some countries, such as India and Vietnam, we acquire non-bank entities, consumer banking or even micro-financing. So, we want to create a second mother market besides our original home market.”
Foray into South Asia
In December 2021, SMBC completed its acquisition of a 74.9% stake in Fullerton India for some US$2 billion, marking the first entry into the South Asian country’s retail financial business by a Japanese bank.
Eventually, SMBC plans to raise its stake to a full acquisition, buying out the non-banking financial company from Fullerton Financial Holdings, a unit of Temasek Holdings.
SMBC is eyeing these markets in South and Southeast Asia for their large and growing middle-class populations, says Kunibe.
Another of SMBC’s forays into Southeast Asia is Indonesia’s Bank BTPN, a merger between PT Bank Tabungan Pensiunan Nasional Tbk and PT Bank Sumitomo Mitsui Indonesia.
As at Sept 30, SMBC owns a 92.43% stake in Bank BTPN. On Nov 1, Bank BTPN reported 9M2022 net profit after tax of IDR2.418 trillion ($210 million), 18.2% higher y-o-y.
In a pioneering move, Bank BTPN launched digital bank Jenius in August 2016. Jenius recorded 4.21 million registered users at the end of September, 20% higher y-o-y. “It is actually one of the largest digital banks in Indonesia,” says Kannan.
As at Sept 30, third-party funds managed by Jenius showed an increase of 33% y-o-y to IDR19.4 trillion, and total loans disbursed through Jenius (Flexi Cash) reached IDR786.86 billion, up 185% y-o-y.
In August, SMBC group announced Jenius will launch in the US and operate as a new division of California state-chartered Manufacturers Bank, its wholly-owned subsidiary. “The US is simply a huge market,” says Nishimura. “We’re not going to be aiming to acquire double-digit market share. If we acquire only 1%, it will be a material business.”
Photos: Albert Chua/The Edge Singapore
