SMFG eyeing private banking tie-ups

By Jonathan Soble

TOKYO (Reuters) - Japan's third-biggest bank, Sumitomo Mitsui Financial Group (SMFG) (8316.T: Quote, Profile, Research, Stock Buzz), is examining alliances with U.S. and European banks as it expands asset management services for its wealthy domestic clients, the head of its private banking division said on Wednesday.

The division plans to increase its staff of private bankers to 100 from 60 in a year as part of a drive to offer its top clients fund management and investment advice and expand beyond its current customer base of wealthy business owners.

"We're considering alliances, including with foreign banks," Masahiro Kume said at the Reuters Wealth Management Summit in Tokyo.

"It's difficult to expand overseas in one push," he said, "So when it comes to placing offshore investments, if there is interest from our clients we could cooperate with a foreign private bank to increase our range of services."

Asset management is expanding in Japan as the economy rebounds and deregulation allows financial institutions to sell a broader mix of investment products. A looming wave of retirements by Japanese baby boomers, expected to begin next year, has bankers jockeying to manage their nest eggs.

At the upper end of the market, some 865,000 Japanese households have at least 100 million yen ($850,000) available to invest, according to Nomura Research. Financial assets held by this group totaled 213 trillion yen ($1.8 trillion) as of March, up 30 percent since 2003 thanks to Japan's stock market rebound.

Since it launched the private banking business in 1999, SMFG has catered to very richest clients -- those with at least 1 billion yen in assets, and in some cases more. Such clients mainly wanted advice on corporate succession, inheritance and taxes, Kume said.

"We started with the people who were easiest to approach, because these people owned companies that already had relationships with us," he said. Now, however, the bank is adding more asset management to the mix and lowering its minimum account size.

"The 300 million to 500 million yen segment is actually the most profitable, because those people want to take risks," he said. "People with 10 billion yen want to protect their wealth, but people with 300 million to 500 million want to grow it."