On Monday, Jefferies, a global investment banking firm, started coverage on SBI Sumishin Net Bank Ltd (7163:JP) with a Buy rating and set a price target of JPY4,700. The company, which is a significant player in the Banking as a Service (BaaS) sector, is recognized for its innovative approach in connecting non-banking services with traditional banking.
The analyst from Jefferies highlighted that SBI Sumishin is a leader in the BaaS space, which is expected to face increasing competition from other major banks, such as SMFG with its Olive App. Despite this, SBI Sumishin's partnership with SBI Holdings, which owns a 34% stake in the bank, aims to establish it as a 'Super Regional Bank' and potentially the fourth megabank in the region.
The pursuit of becoming a 'Super Regional Bank' is in motion, but the analyst noted that there is competition from other financial entities like Resona and various regional bank consolidations. These competitors are also striving to expand their influence and market share in the banking sector.
The collaboration with SBI Holdings is a strategic move for SBI Sumishin as it seeks to strengthen its position in the market. The support from a significant shareholder such as SBI Holdings could be a driving factor in the bank's ambition to scale up and compete with larger banks.
Jefferies' initiation of coverage with a Buy rating reflects confidence in SBI Sumishin's growth trajectory and its strategic initiatives. The price target of JPY4,700 indicates the potential for the stock to appreciate from its current levels, as the bank continues to navigate the competitive landscape of the financial industry.
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