Sumitomo Mitsui Financial Group Inc.’s top executive said the Japanese lender needs to be cautious in its drive to boost lending in Asia, as a slowdown in China and the slump in commodity prices cloud the region’s economic outlook.
While the bank’s President Koichi Miyata said he has no intention of changing his firm’s strategy of focusing on Asia, he expects it to be difficult to grow the bank’s Asian loan book for a while.
“China is slowing, natural resource prices are falling, and there’s also the issue of slowing in countries that are highly dependent on trade with China,” Miyata, 62, said in an interview earlier this month. “A cautious approach is going to be needed with regard to credit in Asia for the time being.”
Japan’s second-largest lender by market capitalization said when it started its current three-year plan in March 2014 that it would become a “truly Asia-centric institution” by boosting loans and profit in the region to make up for reduced earnings at home, where revenues have been hurt by a shrinking population and near-record low interest rates. The check to those plans from China’s stock market rout and falling gross domestic product growth rates across Asia is only a temporary one, Miyata said.
“There is no change in my confidence that Asia will be the core of our business in five to 10 years time, and there’s no change to our long-term commitment to the region,” said Miyata. “I believe China’s economy will have a soft landing and oil prices and markets will stabilize toward next summer.”
Sumitomo Mitsui is still searching for ways to revive growth in Asia, and Miyata raised the bank’s recent initiatives in Indonesia and India as examples. Using Bank Tabungan Pensiunan Nasional, of which it holds 40 percent, Sumitomo Mitsui started mobile-banking services in Asia’s third-most populous nation in April. Miyata said the Indonesian bank has already added “tens of thousands” of new accounts, and he plans to use the expertise gained to develop services in other countries, such as Myanmar.