Goldman may see raft of risk deal-flow from Sumitomo stake

Goldman Sachs may see a significnant increase in structured finance deals and other risk transfer activity following its ¥150 billion ($1.27 billion) investment in Japanese bank Sumitomo Mitsui Financial Group.

The deal, which should see the US investment bank gain a 7% stake in Sumitomo, will see Goldman assist in the management of the Japanese bank's near $50 billion portfolio of non-performing loans. Goldman will also get a $1 billion line of credit for its own clients, which it could use on a selective basis to gain lucrative investment banking activity.

The deal represents a continuation of Sumitomo and Goldman’s long-standing relationship, as well as cementing traditionally close ties between the US and Japanese financial communities. In the 1980s, it was the Japanese bank that helped Goldman resolve its own financial problems with a $500 billion investment. Now, Japanese banks are under pressure to address capitalisation issues exacerbated by the country’s present economic problems.