By David Dolan - Analysis
TOKYO (Reuters) - Unburdened by heavy subprime losses, and stuck with sputtering growth at home, Japan's big banks are once again investing and lending abroad, but investors should not expect a string of blockbuster buyouts.
Only a few years removed from a bad-loan crisis that pushed many lenders to the brink of collapse and sparked widespread industry consolidation, Tokyo banks will continue to keep their acquisitions conservative, bankers and analysts say.
Last week Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz), Japan's third-largest bank, said it would pay about $1 billion to take a 2 percent stake in Britain's subprime-scorched Barclays (BARC.L: Quote, Profile, Research, Stock Buzz).
Earlier this year Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) injected $1.2 billion into Merrill Lynch & Co. MER.N.
Although big news by recent standards, the deals are minor-league compared to the overseas shopping spree of the 1980s, when at one time Japan was estimated to control more than a quarter of California's banking market.
Most of those investments were later sold as Tokyo faltered under mounting bad loans. Now that the subprime crisis has sapped Western financial firms of cash and risk appetite, Japanese bankers acknowledge they have a chance to rebuild overseas.
"We would of course consider investing in financials where capital has been depleted by the subprime," Tatsuo Tanaka, deputy president of the core bank of Mitsuibishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) told the Reuters Japan Investment Summit this week.
But Tanaka acknowledged that Mitsubishi UFJ, Japan's largest bank, would take a cautious tack in building up overseas.
"There's a difference between a financial investment and a strategic investment. Rather than looking to boost our short-term profits, we would build a mid- to long-term relationship with a financial firm," he said.
Top Mitsubishi UFJ bankers, including the president of the group's main bank, have said the bank aims to take minority stakes in overseas firms, and then build business alliances.
Mitsubishi UFJ's brokerage arm in April raised its stake in Singapore's Kim Eng Holdings (KEHS.SI: Quote, Profile, Research, Stock Buzz) to about 15 percent. Together the two firms operate a joint venture in asset management.
TYPICAL JAPANESE?
The strategy of taking a small portion in an overseas firm -- such as Sumitomo Mitsui's 2 percent stake in Barclays -- is too meek to deliver real results, said Kristine Li, banking analyst at KBC Securities in Tokyo.
"It's very typical Japanese style: first you put a little capital in and try to do some kind of tie-up," Li said in a recent interview with Reuters.
"I just don't think it's Western style and I don't think it will really deliver anything significant." Continued...
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