Sumitomo Mitsui Trust to restructure its asset management business

03 February 2017   Category: News, Asia, Global, Japan   By Asia Asset Management

Japan’s Sumitomo Mitsui Trust Holdings (SMTH) is looking to separate its banking and asset management businesses, through reassigning Sumitomo Mitsui Trust Bank’s asset management operations to Sumitomo Mitsui Trust Asset Management (SMTAM); making it the largest asset manager in Japan with a total AUM of 60 trillion yen (US$528.5 billion) upon completion of the integration, according to Nikkei Asian Review.  

A spokesperson from SMTH could not confirm the news though, and the company is yet to issue any official statement in regard to the speculated restructuring. “While we’re considering various strategies and measures in light of [the] transformation of our business model, no corporate decision has been made at this moment, including [on] this matter,” said the spokesperson.

However, Nikkei Asian Review also claims the Sumitomo Mitsui Trust Group (SMTH is the holding entity of Sumitomo Mitsui Trust Group) is working on a roadmap for the reorganisation, with aims to complete the process within five years. Other players that have previously been associated with the reorganisation include Mizuho Financial Group, but any speculation with regard to the firm’s involvement has since been played down, according to Kyodo News.

Currently Japan’s largest asset manager is Asset Management One, with around 51 trillion yen in AUM – this entity was created through a merger between Mizuho Financial Group and Dai-ichi Life’s asset management operations last October. 

In the context of asset management businesses, Japanese trust banks are one of the major investment channels for the country’s 305 trillion yen pension market, alongside life insurers, domestic asset managers and foreign asset managers.

However, a Nomura Research Institute (NRI) report highlights the fact that many Japanese banks lack the resources to upgrade their portfolio management capabilities to accommodate broader diversification.

This dilemma was evidenced by the decline in the banks’ securities investment holdings, which saw a 28 trillion yen decline as of March 2016, according to NRI.   

Whilst the negative interest rate policy pursued by the Bank of Japan places pressure on the profitability of Japanese banking groups, it is possible for the groups to seek integration opportunities as a means of boosting the scalability of their businesses in order to curb costs.