* Bank of Tokyo-Mitsubishi UFJ hire bankers who speak
* Sumitomo Mitsui Banking Corp increasing loans to U.S.
* Mizuho Corporate Bank pursues overseas M&A financing
By Taiga Uranaka
TOKYO, April 22 Japan's banking titans are
hiring Spanish-speaking bankers to win new business in Latin
America and handing out loans to junk-grade borrowers in the
United States as they probe deeper overseas to fight meagre
returns at home.
Lenders such as Sumitomo Mitsui Financial Group Inc (SMFG)
have ramped up overseas lending since the euro zone
debt crisis sent European rivals packing. The move abroad was
given a new impetus this month after the central bank unveiled a
stimulus plan that will plunge Japan into an ultra-low monetary
environment, further eroding razor-thin loan margins and cutting
returns on Japanese government bonds.
Banks including Mizuho Financial Group Inc are
pushing ahead to identify new overseas borrowers, including
corporates with little Japanese connections and natural
resources developers seeking copious funding. Their ventures
abroad, while still modest versus their domestic operations,
point to their growing risk-tolerance in emerging markets, and
it remains to be seen whether their efforts will pay off.
"We now arrange deals that are very different from what we
used to do in the past, that is, those with very strong local
flavour with no involvement of Japanese companies," said
Takayuki Sakai, chief manager of project finance at Bank of
Tokyo-Mitsubishi UFJ, a core unit of Mitsubishi UFJ Financial
Group Inc (MUFG).
The bank is looking to increase local currency-denominated
lending, such as those in the real, as opposed to the usual
dollar-dominated loans, he said.
Bank of Tokyo-Mitsubishi UFJ has been beefing up its project
finance business in Latin America, hiring specialist bankers who
speak Spanish and Portuguese to gain better access to projects
involving exclusively local parties.
Last summer, the bank hired Ralph Scholtz, BNP Paribas'
Latin America project finance managing director, as its region's
project finance team head, as well as a Portuguese-speaking
banker from HSBC Holdings Plc.
The bank said Latin America is a promising market for
project finance, highlighting plans in Mexico to build gas
pipelines, and development of copper mines and auxiliary
facilities such as power plants in Chile.
MUFG does not disclose dollar-based overseas loan data.
Domestic rivals SMFG and Mizuho's outstanding overseas loans
totalled $277 billion as of December, a hefty 66 percent
increase from March 2010.
Sumitomo Mitsui Banking Corp (SMBC), a core unit of SMFG,
said a team of its U.S bankers are targeting small and
medium-sized local businesses, including those with credit
ratings of BB or lower.
The bank declined to disclose interest margins for those
non-investment grade borrowers. Industry sources say loans to
BB-rated borrowers have spreads of 170-180 basis points over
There is a limit to what banks can earn from loans to
clients with a top-notch credit status, said Hideo Kawafune,
senior vice president at SMBC's international banking unit.
"Our current loan portfolio is a bit weighted on high credit
rating borrowers, and we would like to expand lending to
customers in the BB+ to BB- class," Kawafune told Reuters.
The bank is increasing loans to U.S. municipalities after
poaching a public finance team from a U.S. bank in 2008. Recent
transactions include a $209 million loan to New York City Water
Kawafune said loans to non-investment grade corporates and
municipalities in the United States still represent a small
portion, roughly 10 to 20 percent of the overall loans
But their growth is outpacing the rest of the bank's
overseas lending, he said.
Mizuho Corporate Bank, a unit of Mizuho Financial, said
acquisition financing for non-Japanese companies is likely to
drive its overseas loan growth this year.
The bank is working on financing for two
multi-billion-dollar M&A deals involving corporate clients based
in North America and Europe, Mizuho bankers said, without
elaborating, citing bank-client confidentiality agreements.
Mizuho Corporate Bank said previously it is targeting big
companies such as BP PLC, Prada SpA and IBM
in the Americas, Europe, East Asia and Oceania.
Kazuya Nakagawa, senior vice president at Mizuho's
international coordination division, said M&A finance is
relatively profitable compared to loans to blue-chip companies.
M&A finance is attractive in that it provides short-term
loans to borrowers, and so does not tie up the bank's capital
It could also lead to additional businesses when the
borrower switches to a more permanent mode of financing upon the
completion of the acquisition, such as issuing bonds, according
to Mizuho bankers.