Daiwa to Sell U.S. Operations to Sumitomo

TOKYO â€”  Scandal-plagued Daiwa Bank Ltd. has agreed to sell most of its outstanding loans and bank offices in the United States to Sumitomo Bank Ltd. for about $3.37 billion.

As part of the sale, Sumitomo is paying $65 million for Daiwa commercial bank branches in 15 U.S. cities, including Los Angeles and San Francisco, and nearly all of the Daiwa Bank Trust Co. subsidiary. Sumitomo is paying the remaining $3.3 billion for an equal amount of Daiwa’s loans and related assets, a Sumitomo spokesman in New York said Monday.

Daiwa will sell to Sumitomo all assets of Daiwa Bank Trust except individual accounts, which are being referred to Bank of Tokyo Trust Co.

Daiwa and Sumitomo, both based in Osaka, Japan, signed a contract Friday.

The Federal Reserve Board ordered Daiwa on Nov. 2 to terminate its U.S. operations within 90 days. Daiwa is also fighting U.S. criminal charges alleging fraud and conspiracy involving $1.1 billion in bond-trading losses over 12 years at its New York branch. Daiwa delayed reporting a trader’s losses from U.S. authorities for two months but has denied wrongdoing.

The incident temporarily strained relations between the two countries and led to international concerns about the secretive practices of Japan’s banks and their close relationships with financial regulators.

As part of the deal, Sumitomo is buying commercial banking branches, agencies and representative offices from Daiwa in Los Angeles, San Francisco, Atlanta, Baltimore, Boston, Chicago, Dallas, Houston, Miami, Minneapolis, New York, Philadelphia, Pittsburgh, St. Louis and Tampa, Fla.

Daiwa acquired most of those properties from Lloyds Bank in 1990.

The Japanese banks, which are believed to be considering a merger, said the entire transfer process will be concluded by Friday, Daiwa’s deadline for vacating the United States.

Sumitomo is the fourth-largest bank in the world with assets of $556 billion. It has $30 billion in assets in the United States.

Daiwa said unsold U.S. assets, mostly commercial loans, will be transferred to Daiwa Bank’s Japan operations.