Sumitomo Mitsui Financial Group (SMFG), Japan’s second largest lender, is readying plans to take over investment bank Jefferies, the Financial Times has reported.

Sumitomo Mitsui Banking Corporation – the group’s banking arm – holds a minority stake in the US bank and has a small team tasked with ensuring the lender is ready to act should Jefferies’ share price continue to fall, according to people familiar with the matter.

Such a move is not imminent, and would face regulatory hurdles as well as the challenge of bridging a cultural gap between Wall Street and Marunouchi. It is also uncertain whether Jefferies would be willing to sell at a share price 37 per cent lower than at the start of the year.

Jefferies declined to comment to the Financial Times, while a spokesperson for SMFG told the outlet: “Jefferies is our important partner. We decline to comment on hypothetical assumptions or rumours.”

The two banks have developed strong links in recent years leading Japanese executives to believe SMFG is the most likely buyer should the bank decide to sell. SMFG currently holds a 20 per cent stake in Jefferies, following an initial five per cent stake in 2021. Significant stakes are also held by Jefferies’ chief executive Rich Handler, president Brian Friedman and chair Joe Steinberg.

Jefferies’ share price has fallen sharply in 2026, driven by concerns over its underwriting standards in the collapse of auto-parts group First Brands. The bank had over $700 million of exposure in receivables linked to the group, which is currently under federal investigation for fraud.

Jefferies shares are trading 3.72 per cent higher at time of writing, and SMFG is up 2.36 per cent. At time of writing, the company’s quarterly financial results are due tomorrow.

---