Big Story 10

Japan's SMFG names finance chief Ota as bank's new CEO

TOKYO (Reuters) - Sumitomo Mitsui Financial Group Inc (SMFG) on Friday named finance head Jun Ota as chief executive, at a time when Japan’s third-largest bank draws growing attention for possible merger-and-acquisition activity given a buildup of cash.

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Ota, 60, has widely been seen as successor to CEO Takeshi Kunibe, who will become chairman. The change will take place in April, SMFG said on Friday.

“We are facing an environment that’s set to dramatically change. Ota has an ability to read these changes and adapt to them,” Kunibe told a news conference, citing trends such as digitalization.

The smallest of Japan’s three mega banks with 207 trillion yen ($1.82 trillion) in assets, SMFG is the most profitable as measured by return on equity, due in part to an emphasis on higher-margin borrowers such as small and mid-sized businesses.

Initially as president of SMFG’s core unit and as overall chief since last year, Kunibe steered SMFG’s transformation from a traditional commercial bank to a financial conglomerate with investment banking and asset management businesses. He will replace Koichi Miyata as chairman.

Relatively unscathed by a global financial crisis a decade ago, SMFG and Japanese rivals aggressively expanded overseas to make up for subdued loan demand at home. During Kunibe’s seven-year stewardship, SMFG’s total assets grew by over 50 percent.

But in more recent years, Kunibe has been curbing balance sheet growth, in part to meet stricter capital requirements, by shifting emphasis to reshuffling SMFG’s asset portfolio.

Rie Nishihara, senior analyst at JP Morgan Securities Japan, said SMFG has likely built up more than enough funds to meet global capital rules.

“The question will be how it will use the surplus capital,” she said. “Unlike MUFG, SMFG has not made a large, growth-seeking investment overseas, so that’s a focus of attention.”

Major overseas investments by Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s biggest bank by assets, include buying 77 percent of Thailand’s Bank of Ayudhya PCL.

“The challenges are how we can use surplus capital for shareholder returns as well as our growth strategy, including by inorganic means,” Ota said. The incoming CEO said he would like to consider acquisition opportunities in emerging Asian markets in addition to Indonesia, where it is seeking to raise its interest in BTPN to majority ownership.

Ota joined Sumitomo Bank in 1982, which became SMFG through a merger at the beginning of the millennium.

Ota is popular and respected in banking circles for both business acumen and a somewhat mischievous character. Staff have described him as a demanding but understanding boss whom they expect would be a suitable chief executive.

Asked to compared himself with his predecessor, Ota said he is no match for Kunibe as manager. “But I’m good at fighting!” said the former college American football player.

Most recently, Ota has been both SMFG’s finance and strategy chief, a double role seen as being groomed for the top job.

Reporting by Taiga Uranaka and Taro Fuse; Editing by Muralikumar Anantharaman and Christopher Cushing