SMFG: Few assets being offered at attractive prices

A woman walks past a signboard of Sumitomo Mitsui Banking Corporation in Tokyo November 14, 2011.

TOKYO (Reuters) - Sumitomo Mitsui Financial Group (8316.T) said it has been fielding lots of asset offers, about $100 billion worth since early last year, but attractive deals are few and far between as European banks were not desperate enough to embark on a fire sale.

SMFG and other Japanese banks are well positioned to snap up assets being shed by European players as they have little exposure to the region's sovereign debt woes and access to cheaper funding.

SMFG has been the among the most aggressive, buying the aircraft-leasing business of Royal Bank of Scotland (RBS.L) in a deal worth $7.3 billion and project finance loans from the Bank of Ireland (BKIR.I) for 470 million euros.

But Hiro Hyakutome, general manager of global business strategy at SMBC, the core banking unit of Japan's third-largest lender, said these deals aside, most others were not attractive.

"Not many European sellers are offering assets that would generate returns we want. Their prices have not come down to levels we would like," he told Reuters in an interview on Wednesday.

"European banks are not likely to sell their assets at loss given their need to preserve capital."

Sources said this week that talks between SMBC and WestLB WDLG.UL over the sale of the German bank's corporate lending business have collapsed mainly due to differences over valuations. SMBC declined to comment on the talks.

Facing weak growth prospects at home, the bank last year set up a team of about 10 bankers headed by Hyakutome to oversee M&A efforts abroad.

Hyakutome, who spent nearly two decades in the United States before taking his current position, said there are several deals of interest at this moment although none of them have reached the stage where negotiations are serious.

SMFG's ambitious plans for overseas expansion plan also include increasing its overseas loan balance by $77 billion or 70 percent in the three years to March 2014.

With European lenders in retreat, Japanese banks have seen sharp growth in their overseas loan balances in the latest quarter.

"The business environment has changed a lot since we made our three-year business plan. We have made our presence felt earlier than expected," said Hideo Kawafune, senior vice president at SMBC's international banking unit.

The trend has made Japanese banks even pickier about M&A.

"We may be able to achieve bigger-than-expected organic growth, so we are not so desperate about inorganic growth," said Kawafune.

($1 = 78.4250 Japanese yen)

(Editing by Edwina Gibbs)