Fullerton India's acquisition value accretive for Sumitomo: Moody's

The substantial goodwill that the deal will generate will result in SMFG's Common Equity Tier-1 ratio declining by only around 22 basis points in fiscal 2021

Sumitomo Mitsui Financial Group's (SMFG's) investment in Temasek-backed Fullerton India Credit Company (FICC) will improve SMFG's profitability and diversify its overseas operations. These benefits will accrue without any significant weakening of its balance sheet, according to rating agency Moody's.

The deal to initially acquire 74.9 per cent shareholding and eventually have 100 per cent stake will result in significant goodwill and is credit positive for SMFG. Japanese financial services group has inked a pact with Fullerton Financial Holdings, a subsidiary of Singapore government-owned Temasek to acquire a 74.9 per cent stake for $ 2 billion.

However, the goodwill is a result of