March 24 (Reuters) - Japan's Sumitomo Mitsui Financial

Group ( SMFG ) is working on plans for a possible takeover of

Jefferies, the Financial Times reported on Tuesday,

sending shares of the U.S. investment bank up 9% in premarket

trading.

SMFG, Japan's second-largest banking group, has assembled a

small team to prepare for a potential move if a drop in

Jefferies' share price creates an opportunity, the report said,

citing people familiar with the matter.

Shares in the U.S. investment bank, which competes with some

of Wall Street's biggest names, have fallen more than 36% this

year after steep declines last year when a unit linked to

Jefferies' asset management arm was involved in the bankruptcy

of U.S. auto parts supplier First Brands.

It has come under scrutiny over its lending standards and

risk appetite. Investors are suing the bank, alleging it

defrauded them into investing in a fund linked to First Brands,

which owed Jefferies' Leucadia Asset Management arm about $715

million in receivables.

Reuters could not immediately verify the report. SMFG

declined to comment and Jefferies did not immediately respond to

a request for comment.

The U.S. firm has a market capitalisation of $8.17 billion

as of Monday's close, according to LSEG data. SMFG's market

value is about $124 billion.

SMFG first bought nearly 5% of Jefferies in 2021. In

September, Sumitomo Mitsui Banking Corp, the banking arm of

SMFG, raised its stake in Jefferies to up to 20% with a $912

million investment.

Any move by Japan's SMFG is not imminent, the FT report

said, adding there is no certainty Jefferies' executives would

be willing to sell at a depressed share price.

SMFG will hold off if market conditions or Jefferies'

management do not allow a full takeover, the newspaper added.