With Western lenders treading cautiously in response to the European debt crisis, three Japanese megabanks are ratcheting up their overseas loans to record levels.
According to rankings from Thomson Reuters, Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. were among the top four lead managers of global syndicated loans in the first half of this year.
The top lender, according to Reuters, was an Indian bank that chiefly handles domestic loans, meaning the Japanese banks effectively dominated the top three spots internationally.
"European banks hit by the debt crisis are cutting back on their lending globally, and Japanese banks are making up for the decline," said a top official at Sumitomo Mitsui Banking Corp., the core bank under the Sumitomo Mitsui Financial Group.
The total outstanding overseas loans extended by Japan's three megabanks came to 40.8 trillion yen ($515 billion) at the end of June. That figure is nearly 1 trillion yen higher than at the end of March 2009, when global lending levels were high due to a buoyant economy prior to the collapse of Lehman Brothers.
In the April-June quarter, Sumitomo Mitsui took in 34 percent of its loan-derived profits from overseas countries and regions, already beating its goal of 30 percent for the current fiscal year. The rapid jump was due to a combination of increasing overseas loans and sluggish domestic lending.
Japanese banks sustained only minor damage from the crisis because they had been extending smaller loans in Europe than their Western counterparts.
Facing low interest rates domestically, Japanese banks have become especially active in project financing, the large-scale, long-term funding of infrastructure and other industrial projects. One estimate says $8 trillion will be required for infrastructure development in the growing Asian region through 2020, and Japanese banks have been quick to take advantage of the market's high profit margins despite the large risks involved.
In April, Sumitomo Mitsui Banking Corp. launched a project and export finance department to boost its business primarily in other Asian countries. The bank coordinated loans of about 130 billion yen to build a steel plant in Indonesia and loans of 320 billion yen to develop a massive shopping mall in Singapore.
Japanese banks are increasingly visible in industrialized countries, too.
The Bank of Tokyo-Mitsubishi UFJ orchestrated a 670 billion yen loan for liquefied natural gas production in Australia in May, the world's largest loan package during the first half of this year.
And of the nine banks extending a total of 270 billion yen in loans to a British high-speed railway project by Hitachi Ltd., six are Japanese institutions--the three megabanks, the government-affiliated Japan Bank for International Cooperation, Mitsubishi UFJ Trust and Banking Corp. and Sumitomo Mitsui Trust Bank Ltd.
(This article was written by Tokuhiko Saito and Naoyuki Fukuda.)
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