Japan banks eye assets of Europe peers

Written by The Financial Times | Updated: Dec 31 2011, 07:16am hrs
By Michiyo Nakamoto in Tokyo

Japans leading banks are interested in buying assets from struggling European peers, but believe growing pressure to shrink their balance sheets will force European lenders to offer better quality assets at more attractive prices next year, according to two top Japanese bankers.

The eurozone crisis is presenting Japanese banks with a good opportunity to expand overseas by buying assets from European banks, the heads of Japans second and third-largest banking groups by assets told the Financial Times in separate interviews.

We consider this a business chance, said Koichi Miyata, president of Sumitomo Mitsui Financial Group, which recently bought 590m euros worth of project finance assets from Bank of Ireland at a 15 per cent discount to the value of the loans. If there are good assets, we would like to buy more, he said.

Yasuhiro Sato, chief executive of Mizuho Financial Group, said: It is undeniable that this is an opportunity for Japanese financial institutions to expand their overseas businesses, because very high quality assets will be sold.

Mr Sato added that in addition to the loan assets European banks are offering to sell, if they are going to let go of their subsidiaries, for example, in Asia, or Central and South America, or the shares in local companies that these subsidiaries have, such things will be an opportunity.

Many European banks face pressure to sell their loans in order to meet new, more stringent capital adequacy requirements by next June. Japans megabanks, in contrast, are already well capitalised and are looking to expand lending, particularly overseas.

Japans top banks, including Mitsubishi UFJ Financial, have been looking to expand overseas to offset a decline in core lending business at home as the Japanese economy flags.

SMFG is interested in buying infrastructure and environment project finance assets as well as loans to blue-chip companies in Asia or North America. But we are not considering European assets at the moment due to the uncertain outlook there, Mr Miyata said.

Mizuho is keen to acquire assets that offer direct relationships with customers, particularly blue-chip companies in Asia, as well as in Europe, Mr Sato said.

Japanese banks have a mixed record in international expansion. The latest effort by Nomura to go global after the 2008 financial crisis has run into trouble in Europe, where it bought the former Lehman Brothers franchise, and in the US where it has sought to build a business from scratch under its own steam.

That means that while SMFG and Mizuho might now be bullish about expansion opportunities in Europe, Nomura is going in the opposite direction, radically cutting back on its ambitions in the region.

Additional reporting by Patrick Jenkins in London

The Financial Times Limited 2011