Japan's Sumitomo Mitsui Financial Group (SMFG) and Sumitomo Corp are buying the aircraft-leasing business of Royal Bank of Scotland in a deal worth $7.3 billion, in the most aggressive acquisition by a Japanese lender since European banks began offloading non-core assets.
With little exposure to Europe's two-year-old sovereign debt crisis, SMFG, Japan's third-largest bank by assets, and its local rivals are well positioned to mop up customers and assets as European lenders seek to repair their balance sheets. "We are likely to see more acquisitions of overseas assets by Japanese banks as European rivals continue to shed their non-core assets," said a banking analyst at a European investment bank. He declined to be named because his bank has been also selling its assets.
RBS Aviation is being sold as RBS shrinks back to its core British retail and commercial banking business. It marks the biggest disposal since the bank started aggressively downsizing when the British taxpayer was forced to rescue it just over three years ago, giving the state 83 percent ownership.
SMFG will take around 70 percent of RBS Aviation Capital, while trading company Sumitomo will hold the rest, the two firms said in a statement. The two already run an aircraft-leasing joint venture. For SMFG, the deal gives a boost to its leasing business, which has bigger profit margins than straight corporate loans, as the bank continues to see weak lending demand at home due to a sluggish economy.
The two companies said they would tap a growing aviation industry in Asia's emerging markets and the acquisition of RBS's business helps expand their overseas presence in the field. The companies did not announce the cost of the acquisition, but said the assets of the RBS aircraft business were valued at $7.2 billion. A source familiar with the matter had earlier put the deal at $7.3 billion. RBS also confirmed the deal in a statement.