APAC-BFSI-Outlook-2017

Japanese banks on overseas lending spree Unlike Chinese banks, growth of Japanese banks has been largely driven by business opportunities, especially at a time when growth prospects back home are bleak. Japanese banks are not only lending to Japanese companies expanding overseas, they are also ramping up financing of foreign M&A deals to diversify their revenue sources. As such, overseas loans by .three major Japanese banks (Bank of Tokyo– Mitsubishi UFJ (BTMU), Mizuho and Sumitomo Mitsui Banking Corporation (SMBC)) have doubled over the past six years. Last year, Japanese banks were involved in more than half of global M&A financial deals. The rise in Japanese lending comes at the time when US and European majors take a pause to raise profitability to adhere to strict capital bu¥er norms post-GFC. Japanese banks were less impacted by the crisis and so are able to lend more freely. They are also awash with capital raised from selling government bonds over the last couple of years. Japanese banks are expanding aggressively through mergers and acquisitions in Southeast Asia. Recent deals include Bank of Tokyo – Mitsubishi UFJ (BTMU) acquiring major stakes in Security Bank of the Philippines and Thailand’s Bank of Ayudhya. Sumitomo

Mitsui Banking Corporation (SMBC) bought into auto finance companies and Bank Tabungan Pensiunan Nasional (BTPN) in Indonesia, as well as Cambodia’s Acleda Bank. Mizhuo, BTMU and SMBC have also invested in Vietnamese banks. With these large- scale investments, Japanese banking majors are able to quickly tap into the retail banking business, while opening doors for other financial products, such as insurance. Besides Southeast Asia, Japanese banks are also looking to expand in India as the country strengthens its economic and political ties with Tokyo; Mizuho opened its fifth branch in Ahmedabad last year. The growing presence of Japanese banks is also evident in their oŸce footprint across Asia, including regional financial centers. BTMU has opened a new 40,000 sf oŸce in Gurgaon (in India) last year and Mizhuo has expanded to a bigger facility in Mumbai. Besides associating with local financial institutions, Japanese banks are also setting up a number of representative oŸces in emerging markets in Southeast Asia. Despite being small and lacking licenses to lend or take deposits, they act as a bridge for Japanese manufacturers by providing advisory services to venture abroad.

REGIONAL BANKS, ESPECIALLY ONES FROM CHINA AND JAPAN, ARE ON THE RISE.

22 ASIA PACIFIC BFSI OUTLOOK 2017