SMFG seen eyeing Goldman as Japan shops on Wall St

TOKYO (Reuters) - Sumitomo Mitsui Financial Group <8316.T>, Japan's No. 3 bank, plans to invest in Goldman Sachs Group Inc , Japanese media said, in what would be the third big Japanese investment this week on Wall Street.

SMFG said the bank had no deal in place at the moment but media said it wanted to join the list of Japanese financial firms using the upheaval in the United States to aggressively expand abroad.

The purchases, including a big stake in Morgan Stanley and the Asian and European assets of failed Lehman Brothers , are a major turnaround for Japanese banks that were nearly crushed by bad loans just a few years ago and needed massive injections of public cash to stay afloat.

Late on Tuesday, Warren Buffett's Berkshire Hathaway Inc agreed to invest $5 billion in Goldman Sachs, a big boost for the Wall Street bank from the world's best-known investor, but a Goldman spokesman said he could not confirm the report SMFG would follow suit.

SMFG's investment in Goldman Sachs would total several hundred billion yen, Kyodo news agency said, while the Nikkei business daily said the bank would consider investing up to 100 billion yen ($946 million).

SMFG played down the reports, which both cited unnamed sources.

"At this point, it is not true that we've decided to invest in Goldman Sachs," said SMFG spokeswoman Chika Togawa, who declined to comment further.

In a broader rally of financial stocks, shares of SMFG finished up 1.2 percent at 684,000 yen, compared with a 0.1 percent decline in Tokyo's broad TOPIX share average.

"If they take a big position in Goldman, you can definitely say it would be a positive over the medium- to long-term," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"If they take a big enough position so that they can benefit from Goldman's know-how and human resources, it will be positive."

Once considered too naive and cautious for the high-risk, high-return world of investment banking, cash-rich Japanese firms have largely avoided the huge credit losses of the subprime mortgage crisis, leaving them well-placed to pick up the best assets from the carnage on Wall Street.

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Nomura Holdings Inc <8604.

Japan's top bank, Mitsubishi UFJ Financial Group Inc <8306.T>, has agreed to buy up to 20 percent of Morgan Stanley for as much as $8.5 billion.

Back from a one day market holiday on Tuesday, shares of Nomura rose 5.2 percent to 1,505 yen, and Mitsubishi UFJ gained 4.2 percent to 936 yen. Tokyo's index of bank stocks <.IBNKS.T> rose 1.1 percent.

"Nomura was able to buy Lehman after it filed for bankruptcy so I think investors think that Nomura got Lehman on the cheap," said Nana Otsuki, banking analyst at UBS in Tokyo.

"It kind of seems that MUFG might have been able to get Morgan Stanley cheaper if they had waited a little," she added.

Both Goldman and Morgan Stanley secured approval from the Federal Reserve to become commercial, deposit-taking banks this week, signaling the end of an era for Wall Street's free-wheeling, investment banking model.

Some analysts had previously speculated that Goldman could turn to SMFG for funding, because the two companies have a history of investing in each other.

In 2003, Goldman bought 150 billion yen in convertible preferred shares of SMFG, giving it a much-needed capital injection while in the 1980s, SMFG's predecessor bank helped bail out Goldman.

Sumitomo Mitsui said in June it would pay 500 million pounds ($927 million) to take a 2 percent stake in British bank Barclays Plc .

SMFG's President, Teisuke Kitayama, later told Reuters the two banks would work together on private and commercial banking outside of Japan.

($1=105.73 Yen)

($1=.5393 Pound)

(Additional reporting by Nathan Layne and Taiga Uranaka; Editing by Lincoln Feast)

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