Many of Japan's more than 100 local banks have long been stuffed
with deposits but starved of loan customers caused by two decades of
economic stagnation — a state the government, in office since
December 2012, has promised to end.
Fearing loan profit being squeezed to an unsustainable degree, the
banking regulator has urged small banks to merge or broaden their
lending scope through, for instance, participating in overseas
project finance with the help of majors such as Mitsubishi UFJ
Financial Group Inc (MUFG) <8306.T>.
Some regional lenders are eager to take part in financing overseas
energy or infrastructure projects, say bankers at major lenders, but
lack expertise as well as access to foreign currency. The regulator
wants majors to bridge the gap — as does the new banking head, who
is also president of MUFG.
"It is desirable for Japanese financial institutions with ample
funds to participate in these projects," said Nobuyuki Hirano, who
became chairman of the Japanese Bankers Association on April 1.
Infrastructure development in Asia alone needs $8 trillion in
financing this decade. Regional banks have the funds, so inviting
them to join syndicates is "worth the effort," Hirano told Reuters
in an interview.
Japan's biggest regional bank by assets is Fukuoka Financial Group
Inc <8354.T>, based on the southwest island of Kyushu, followed by
Bank of Yokohama Ltd <8332.T>, Chiba Bank Ltd <8331.T> and Hokuhoku
Financial Group Inc <8377.T>, showed data from Thomson Reuters.
NO.1 GLOBAL ARRANGER
Global banks often take the lead in arranging syndicates of lenders
to finance projects such as the construction of power plants and
roads. Syndicates can comprise just a few banks to over 30, with
each participant extending loans of varying amounts for projects
costing billions of dollars.
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Japan's MUFG, Sumitomo Mitsui Financial Group <8316.T> and Mizuho
Financial Group Inc <8411.T> have arranged syndicates for an
increasing number overseas projects in recent years, helped in part
by European rivals retreating during the euro zone sovereign debt
MUFG, Asia's biggest private bank by assets, ranked first among
global arrangers last year in terms of amount raised, showed data
from Thomson Reuters. SMFG and Mizuho ranked fourth and fifth
One recent syndicate for a $5 billion oil refinery in Vietnam
involved Japanese regional lenders Shizuoka Bank Ltd <8355.T>,
Yamaguchi Financial Group <8418.T> and Chiba Bank.
Diversifying into overseas project finance strengthens loans
portfolios which at regional lenders are concentrated in local
economies, a Financial Services Agency official told a recent
meeting of regional bank heads, according to an attendee.
"We would like to provide support to financial intuitions actively
participating in overseas project finance," the official said,
according to the attendee who was not authorized to discuss the
matter publicly and so declined to be identified.
(Editing by Christopher Cushing)
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