SMFG could mull raising Barclays stake

By David Dolan and Taro Fuse

TOKYO (Reuters) - Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz) will consider raising its stake in British bank Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) in the future but has no such plans for now, the president of Japan's third-largest bank said on Wednesday.

Teisuke Kitayama told the Reuters Investment Summit in Tokyo that Sumitomo Mitsui would work with Barclays on private and overseas commercial banking, as it looks to boost business outside the faltering domestic market.

Sumitomo Mitsui said last week it would invest 500 million pounds ($997 million) to take a 2 percent stake in subprime-hit Barclays, becoming the second Japanese bank to invest in a weakened Western financial firm.

"So far, our tentative conclusion is to stay with the current, present investment," Kitayama said when asked if the bank would consider raising its stake.

"Then, sometime in the future we will decide whether we will make more investment or not," he said.

Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz), Japan's no.2 bank, earlier this year invested about $1.2 billion in U.S. bank Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz).

Barclays has lost more than $5 billion on assets hurt by the U.S. subprime crisis and credit crunch. It raised 4.5 billion pounds from investors including Qatar and Sumitomo Mitsui to rebuild capital and pursue growth, but some analysts have said it will need to raise more capital.

Sumitomo Mitsui and Barclays will tie up on private banking, for example by offering Barclays' products to the Japanese bank's clients, and in commercial banking in countries where the British bank has a stronger presence, such as South Africa and India.  Continued...