Goldman's Japanese axis

7 January 2010 By Margaret Doyle

Goldman Sachs will ultimately sell its equity position in SMFG. But given that its position was hedged, there is no financial consequence. More importantly, Goldman will keep its commercial ties, retaining its privileged access to SMFG’s huge balance sheet.

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Goldman Sachs plans to sell its equity stake in Sumitomo Mitsui Financial Group, according to a person familiar with the situation. The eventual exit will come after it converts its current preferred stake into ordinary equity as part of SMFG's 889 billion yen fundraising. Goldman acquired the stake for 150 billion yen ($1.3 billion) in 2003.

When it converts, Goldman will have the equivalent of 2.4 percent of SMFG. The value of the stake has already been fully hedged.

However, a business relationship, in which Goldman has access to SMFG's balance sheet, and the Japanese group underwrites up to $1 billion of credit losses to investment grade clients, remains intact.

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