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Daiwa, SMFG To Dissolve Banking Joint Venture

Daiwa is expected to pay $2.2 billion to purchase Sumitomo's 40% stake

Daiwa Securities Group and Sumitomo Mitsui Financial Group are set to end their decade long investment banking joint venture – reported Bloomberg. Earlier, it was reported that both Daiwa and Sumitomo were increasingly under pressure from domestic rivals like Nomura Holdings, which had acquired Lehman Brothers and Mitsubishi UFJ Financial Group, that had joined forces with Morgan Stanley.

Sumitomo wanted to buy majority stake in the joint venture to ramp up its own securities business. However, now it is mulling to sell its 40% stake for about $2.2 billion, and may offer a loan to Daiwa for the acquisition, reported the news agency.

The future of the joint venture has been in dilemma since Sumitomo agreed earlier this year to acquire Citi’s brokerage and securities underwriting operations in Japan for about $6 billion, some of which overlapped with the Daiwa venture – reported Reuters.

According to Bloomberg, Azuma Ohno, a Tokyo-based analyst at Credit Suisse Group AG, said: “Daiwa must respond to this crisis. It remains to be seen how Daiwa will overcome the loss and expand its investment banking on its own, or in an alliance with a local lender or overseas investment bank.”