Dive Brief:

• Sumitomo Mitsui Banking Corp. will boost – to 20% – its equity ownership stake in U.S. investment bank Jefferies, the companies announced Friday.
• The Japanese bank also agreed to extend roughly $2.5 billion in new credit facilities to boost the banks’ partnership in U.S. pre-initial public offering lending; leveraged lending in Europe, the Middle East and Africa; and asset-backed securitization.
• SMBC and Jefferies will also establish a joint venture in Japan to handle equity research, sales, trading and equity capital markets business. That’s expected to begin serving clients in January 2027.

Dive Insight:

SMBC already owns a 14.5% stake in Jefferies – which, at more than $14 billion in market capitalization, stands as the world’s fifth-largest investment bank.

To ratchet up its stake, Sumitomo Mitsui will pay 135 billion yen ($912.8 million) to buy common shares in the open market and then exchange them for nonvoting common shares or nonvoting preferred shares that can later be converted.

SMBC pledged to continue to own less than 5% of a voting interest in Jefferies.

SMBC is hardly the first Japanese bank to own a sizable chunk of a major U.S. lender. Mitsubishi UFJ Financial Group, its larger competitor, owns a 23.62% stake in Morgan Stanley. Smaller rival Mizuho, meanwhile, bought U.S. boutique bank Greenhill in 2023 for $550 million.

Toyoki Sameshima, a Tokyo-based analyst at SBI Securities, told Bloomberg the investment “will likely allow Sumitomo Mitsui to push forward with its U.S. expansion.”

SMBC and Jefferies initially forged a deal in 2021 to collaborate on corporate and investment-banking business opportunities. SMBC expanded its stake in Jefferies in 2023 – from 5% to 15% – and doubled down on collaboration across mergers and acquisitions, equity and debt capital markets, with a focus on investment-grade U.S. clients.

“Our vision is to align SMBC Group and Jefferies in order to offer our clients the best financing and advisory solutions to meet their needs around the world,” Sumitomo Mitsui Financial Group CEO Toru Nakashima said Friday. “We are pleased with our progress to date, see today’s expansion of our Global Strategic Alliance as a further step in achieving our goal and believe we are early in realizing our joint potential.”

Jefferies CEO Rich Handler and President Brian Friedman, meanwhile, said the banks together are “unique in the power of our combined global platforms.”

“Our combined capabilities offer exceptional value to our clients around the world,” Handler and Friedman said in a statement.