Photo/Illutration A Sumitomo Mitsui Bank branch in Tokyo (Yukio Hashimoto)

Sumitomo Mitsui Financial Group Inc. will take a stake in SBI Holdings Inc., the holding company of SBI Group, sources revealed on June 21. 

SBI Group is a major company providing internet-based financial services.

It is rare for a megabank group with a security firm to enter into a large-scale partnership with a large online-based brokerage company.

It is believed that Sumitomo Mitsui aims to expand its internet-based brokerage service by partnering with SBI Holdings.

The plan under discussion between the two companies is that SBI Holdings will allocate new shares to Sumitomo Mitsui, according to sources.

They will decide in future discussions how much Sumitomo Mitsui will pay for the shares and what percentage of SBI Holdings shares Sumitomo Mitsui will own.

SBI Group has expanded to have around 350 firms within it by actively making forays into new businesses, such as crypto assets, under the leadership of its president Yoshitaka Kitao, who formerly worked for Nomura Securities Co.

The companies in the group include SBI Securities Co., a major internet-based brokerage firm, which boasts a solid customer base made up of individual investors and a large number of securities accounts.

The group managed 8.45 million securities accounts as of the end of March, far more than Nomura Securities Co., the largest brokerage firm in Japan.

It aims to grow into a comprehensive financial service provider under its plan to become “the fourth megabank” in Japan.

Along with the plan, it has executed a strategy to expand its businesses, such as taking control in December of Shinsei Bank, whose strengths include corporate lending and consumer finance.

Sumitomo Mitsui has SMBC Nikko Securities Inc.

However, its internet-based brokerage service hasn’t done well, an issue it has had for some time.

Sumitomo Mitsui and SBI Holdings reached a basic agreement in April 2020 to form a capital and business alliance.

Under this agreement, Sumitomo Mitsui acquired a 20 percent equity stake in SBI Neomobile Securities Co., a broker providing services only on smartphones.

The two group companies have since deepened their business relationship.

For example, SMBC Nikko Securities collaborated with a SBI Group company providing face-to-face brokerage service.

It will also open a private stock exchange with SBI Holdings based on the Proprietary Trading System.

It is believed that Sumitomo Mitsui aims to scale up its collaboration with SBI Group by taking a stake in SBI Holdings.

For SBI Holdings, it can expect to expand a customer base with its further collaboration with Sumitomo Mitsui.

Online brokerage service customers tend to be young--not the typical customer base of megabanks.

However, the further collaboration of the two companies will enable them to share customers between them, thus allowing SBI Holdings to market its online-based services to Sumitomo Mitsui’s customers.