SMFG prices largest-ever Japan bank equity offering

In a move that was either brilliantly timed or very lucky -- or more likely a bit of both -- the smallest of Japan's three megabanks by assets, Sumitomo Mitsui Financial Group (SMFG) yesterday raised ¥803 billion ($8.2 billion) from a sale of new shares, which could increase to ¥923 billion ($9.4 billion) if the greenshoe is exercised in full, just as the markets look set to turn down after a long rebound.

The deal represents the largest amount raised from an equity financing by any Japanese bank on record. According to Dealogic, it is almost 60% larger than the former follow-on record of $5.2 billion which was set in 2006, also by SMFG. In terms of all issuers, the SMFG follow-on comes in third on the all-time high list, behind two NTT deals in 1999 and 2000, which amounted to $14.9 billion and $11.4 billion respectively.

The pure equity format reflects investor concerns about the quality of capital at the country's banks, and the failure of hybrid capital to sufficiently absorb losses during periods of stress.