Sumitomo Bank status declines

Press, 24 April 1987, Page 30

Sumitomo Bank status declines

NZPA-Reuter Tokyo Osaka’s Sumitomo Bank, the most profitable bank in Japan for over a decade, is losing that status because of a merger with a struggling bank, but plans to reclaim the greatest-earner title before 1990.

“We’ll be back in position in first place within three years,” President Koh Komatsu said in an interview.

The bank has been aggressive in expanding overseas, entering the lucrative securities business and gearing up for domestic competition, analysts of the banking industry said. Among the problems faced by Sumitomo, the world’s second largest bank in terms of assets after Daiichi Kangyo, are the limits placed on its entry into the U.S. securities business.

Sumitomo last August agreed to pay SUSSOO million for a 12.5 per cent limited partnership in Wall Street’s Goldman, Sachs, but the Federal Reserve, the U.S. central bank, has forbidden for the time being the two companies from exchang-

ing personnel and said they could not increase the amount of business they do with each other.

As part of its effort to expand its retail network, Sumitomo last October merged with Heiwa Sogo Bank, a.< controversial move in light of the smaller bank’s estimated 1U51.29 billion in unrecoverable loans.

Mr Komatsu said that while the merger would initially reduce Sumitomo’s profitability and efficiency, it would vastly expand Sumitomo’s branch network in the Tokyo metropolitan area where it had been relatively weak. Financial analysts are divided on how quickly the gamble might pay off. Some said Sumitomo might have paid too much for Heiwa Sogo in view of its large debts. Others argued the merger was more cost effective than creating a comparable branch network from scratch.

At any rate, Sumitomo will have to devote some time to carrying out its most recent initiatives, analysts said.