Japan’s big banks are increasing their presence abroad, mainly in Asia, by expanding overseas lending to meet brisk demand for funds.
Profit margins from lending operations at home have narrowed due to prolonged ultralow interest rates, while relatively high earnings can be expected on lending abroad.
The banks have reversed previous moves to reduce overseas operations and concentrate on disposing of nonperforming loans piled up due to the bursting of the economic bubble in the 1990s.
At the end of 2013, the combined balance of overseas lending by Japan’s three mega-bank groups stood at some ¥64 trillion, up about 20 percent from the end of March.
Among them, Mitsubishi UFJ Financial Group Inc. recorded the biggest growth thanks to some ¥2 trillion in lending by Bank of Ayudhya of Thailand, which the company acquired last year.
Sumitomo Mitsui Financial Group Inc. has increased its lending mainly in the Americas and Asia, focusing on business loans for infrastructure-related projects.
Mizuho Financial Group Inc. saw its overseas business perform well in Asia and other regions.
Mizuho Financial aims to establish relations with around 50 non-Japanese firms in each of four major regions to increase not only lending but also other operations, including support in bond issuance, among other areas.
According to monthly data released by the Bank of Japan, the combined balance of lending by directly operated foreign branches of the nation’s major and other banks stood at ¥51.61 trillion at the end of last November. This was the first time in 15 years that the figure exceeded ¥50 trillion.
The banks’ total assets abroad, including securities, had grown to ¥106.69 trillion.
“Expanding overseas lending is absolutely necessary for Japanese banks, which have been overshadowed by U.S. and European rivals in terms of earning power,” a senior official at a U.S. investment bank said.