SMBC invests US$30m in GIC-backed fintech OakNorth amid Asean push

GIC-backed fintech OakNorth has secured a US$30 million investment from SMBC, with the Japanese bank driving data-backed lending in emerging markets such as Indonesia.

SMBC's investment via a secondary sale comes amid a recent offloading by Indiabulls Housing Finance at a 25 per cent discount to its previous valuation.

Indiabulls, one of OakNorth's largest investors, had reportedly sold more than 5 per cent of its shareholdings of OakNorth. That brought the UK-headquartered challenger bank to a reduced current valuation of US$2.1 billion from US$2.8 billion. The sale by Indiabulls was for it to raise its equity.

Other Singapore names that remain invested in OakNorth include the Economic Development Board of Singapore's EDBI, and the Singapore-based private investment firm Clermont Group.

OakNorth, which is also backed by Japanese conglomerate SoftBank, is ranked among Europe's most valuable fintechs.

The investments by SMBC into OakNorth has the Japanese bank using OakNorth's credit intelligence software on its commercial loan book and borrowers in the US and Asia. The move is meant to drive automation and efficiency in its portfolio monitoring.

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By analysing borrowers' data and monitoring each against its peers, the software can alert lenders when a loan or borrower needs attention.

SMBC's group chief financial officer and chief security officer Toru Nakashima said the banking group hopes to enhance its corporate lending platforms with the investment in and alliance with OakNorth.

"We are further harnessing the power of AI (artificial intelligence) through big data and machine learning across our strategic markets in South East Asia, such as Indonesia," Mr Nakashima said in a press release.

In May, SMBC had announced in its medium-term management plan that it is seeking to increase profit through "optimising and remodelling" of its businesses.

The Business Times reported last year that the firm had set up shop in Singapore to sell its credit underwriting model to financial incumbents in the region. It expected to ink partnerships with several Asian financial institutions.

This underwriting model is the technology that helped to bring OakNorth to a pre-tax profit of US$44 million in just three years of lending to British small and medium-sized enterprises.