TOKYO -- Japan's three megabanks are raising more funds in currencies other than yen and dollars as they seek opportunities in overseas lending, such as by providing credit to blue-chip companies overseas and offering syndicated loans for resource development projects.
The move comes as big Japanese banks continue to struggle with sluggish domestic earnings, due to rock-bottom interest rates. These banks generally fund their domestic operations with deposits from individuals. But they procure foreign exchange primarily from large-lot customers, such as big companies. Diversifying the sources of their funding is thus a challenge.
But while the balance of foreign-currency loans at Japanese banks totals 59 trillion yen ($501 billion), foreign-currency bank deposits stand at 39 trillion yen, prompting them to look for stable sources of foreign exchange. In Japan, by contrast, the banks have surplus funds.
In Singapore, Mizuho Financial Group issued 5-year bonds valued at 100 million Singapore dollars ($77.1 million). This was the first time a Japanese bank had issued Singapore dollar-denominated bonds in Singapore. Mizuho's Singapore dollar-denominated loans stand at roughly 400 billion yen, and it has almost an equal amount of Singapore dollar deposits.
While loans take about three years to be repaid, on average, depositors typically keep their savings in the bank for about six months. Because depositors can pull their money out quickly during periods of market turmoil, banks need longer-term sources of funding to match the period of their loans.
Sumitomo Mitsui Financial Group in September issued 100 million Australian dollars ($88.1 million) of bonds aimed at foreign investors.
Mitsubishi UFJ Financial Group, for one, is responding in Latin America by teaming up with local banks to obtain foreign currency. Since the summer, it has been working with with Banco Nacional de Comercio Exterior, S.N.C. of Mexico and the Brazilian Development Bank to procure long-term funds denominated in the Mexican peso and the Brazilian real. It will create a framework for the local banks to provide loans to Japanese companies operating in the two countries through Mitsubishi UFJ.