Sumitomo Mitsui Trust Bank will join forces with BNP Paribas Cardif to invest in the latter’s subsidiary in Japan which is slated to open next year.
The two firms will work together to develop basic, low-cost insurance policies for the Japanese market. Premiums are expected to be as low as ¥1,000 (US$9) and the policies are targeted at customers in their 30s or 40s applying for home loans at the bank.
According to a report by Nikkei
, Sumitomo Mitsui Trust Bank will likely buy a 20% stake in the subsidiary for an undisclosed value. It will also gain representation on the company’s board and claim it as an equity-method affiliate.
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In 2015, Sumitomo Mitsui earned ¥17.5 billion (US$159.6 million) in commissions from over-the-counter insurance sales, with savings-type products making up over 90% of sales. However, extremely low yields on Japanese government bonds caused by the country’s ultra-low interest rates made it very hard to generate returns. Insurers began to stop offering these products, cutting off a previously lucrative revenue source for banks.
Sumitomo Mitsui Trust president Masaru Hashimoto said in February that the bank “will shift [its] focus toward fee businesses.” This could mean that it would begin focusing on attracting consumers using insurance, investment trusts and other products offered on top of their mortgage loans.
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