May 24, 2024

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Jefferies (JEF) Deepens Strategic Alliance With SMBC in Canada

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Jefferies Financial Group Inc. JEF announced a deepening of its global strategic alliance with Japan-based SMBC Group. This initiative focuses on enhancing cooperation within the Canadian market regarding corporate and investment banking business opportunities. This move aligns with the trend of U.S. investment banks increasing their efforts in Canada to gain a competitive edge.

SMBC Group consists of Sumitomo Mitsui Financial Group, Inc. SMFG, Sumitomo Mitsui Banking Corporation (“SMBC”), SMBC Nikko Securities America, Inc., SMBC Nikko Securities Canada, Ltd. and other group companies.

This February, Bloomberg reported SMFG’s plans to expand its alliance with JEF. SMFG’s new CEO, Toru Nakashima, was mulling to further widen the bank’s alliance with JEF into Asia in an effort to compete with its Japan rivals, who have been moving rapidly to build out their investment banking overseas, per the report.

In December 2023, JEF announced the establishment of full-service investment banking and capital markets capabilities within the Canadian market, launching a new office staffed with more than 40 professionals with specialization across equity research, investment banking and sales and trading in all sectors.

Jefferies’ strategic alliance with SMBC Group started in 2021, primarily driven by a focus on U.S. leveraged finance and M&A across borders in Japan. Last year, the partnership expanded its reach in the U.S. markets to strengthen the scope of collaboration in mergers and acquisitions (M&A) advisory services, extended cooperation across the firms’ equities and debt capital markets businesses, and launched a joint coverage model for designated investment-grade clients. Further, in January 2024, the alliance was further deepened through an extension to cover Europe, the Middle East and Africa regions.

As part of the initial strategic alliance, SMBC financed JEF with $2.25 billion and purchased almost 4.5% of the outstanding common shares of Jefferies. In April 2023, the alliance was further strengthened, with SMBC announcing its plans to boost its economic ownership to up to 15%, including convertible and dilutive securities, thus becoming one of the largest shareholders in Jefferies.

Bruce Rothney, CEO of Jefferies Canada, said, “In just the first few months since opening Jefferies’ new Canada office, we have already witnessed the benefits that the Jefferies-SMBC strategic alliance will bring to our valued clients. SMBC’s capital base and world-class capabilities will enable us to jointly offer comprehensive, full-service solutions to our clients in Canada.”

Jefferies will combine its extensive industry, M&A, leveraged finance and equity capital markets expertise with SMBC’s debt capital and deep banking competence and robust balance sheet to cater to the client needs.

Over the past six months, JEF shares have gained 23.8% compared with the industry’s 25.3% growth.

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Currently, JEF carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Financial Services Firms Taking Business Restructuring Steps

Earlier this week, Barclays PLC BCS made a push into the private credit market. The company, along with AGL Credit Management, a premier investment manager specializing in corporate credit strategies, announced a cooperation agreement and the launch of a private credit investment platform, AGL Private Credit (AGL PC).

The platform combines AGL’s established credit capability with proprietary access to BCS’ leading leveraged finance and investment banking origination capabilities.

Similarly, SEI Investments Co. SEIC augmented its Separately Managed Account (SMA) and Unified Managed Account (UMA) solutions offered via the Managed Account Solutions program. These enhancements will enable the company to serve its clients more efficiently.

The demand for SMAs and UMAs is gaining momentum, given the personalized investment offerings with improved tax efficiency. UMAs’ growth trajectory has been impressive over the last half-decade, with assets witnessing a compound annual growth rate of 34%, per the Cerulli U.S. Managed Account Report. The uptrend is expected to persist over the next four years. SEIC’s strategic move expects to further capitalize on the anticipated momentum.

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Barclays PLC (BCS) : Free Stock Analysis Report

Jefferies Financial Group Inc. (JEF) : Free Stock Analysis Report

SEI Investments Company (SEIC) : Free Stock Analysis Report

Sumitomo Mitsui Financial Group Inc (SMFG) : Free Stock Analysis Report

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