Sumitomo Mitsui Banking Corporation (SMBC) has sold a $1.5bn (£1.1bn) portfolio of Asia Pacific investment-grade loans to Apollo Global Management.
Japanese bank SMBC drove the sale of the portfolio to free up capital and cut risk-weighted assets, according to sourced cited by Bloomberg.
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Risk-weighted assets might include a bank’s loans or bonds, which are given a weighting according to their inherent risk.
Banks are obliged to keep a sufficient capital buffer to mitigate these risks and satisfy regulatory requirements.
Citing “people familiar with the matter”, the report suggested some of the investments were not cost effective for the returns being generated.
SMBC seems keen to grow its presence in the private credit space. In May, it partnered with Monroe Capital and MA Asset Management on a joint venture that planned to commit $1.7bn in senior secured loans to US middle market borrowers.
“SMBC, Monroe and MA Financial each share a similar approach to private credit investing with a focus on providing loans to high-quality borrowers backed by top-tier middle market private equity owners,” said Glenn Autorino, co-general manager, managing director and co-head of leveraged finance, SMBC Americas division, at the time of the announcement.
“These partnerships are an important strategic milestone for the continued development of SMBC’s private credit business, and we are excited to commence capital deployment.”
Apollo and SMBC were unavailable for comment.
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