18 February 2019
Mitsubishi UFJ, Japan's largest bank by assets, saw its overseas lending hit 42.4 trillion yen (US$352 billion) as of Sept. 30. Photo: WSJ
Mitsubishi UFJ, Japan's largest bank by assets, saw its overseas lending hit 42.4 trillion yen (US$352 billion) as of Sept. 30. Photo: WSJ

Japan’s big banks ramping up foreign M&A lending

Japanese megabanks, under pressure from sluggish domestic growth, are ramping up financing of global mergers and acquisitions.

They are already among the world’s top cross-border lenders and have lent many billions of dollars to Japanese companies also seeking growth abroad through acquisitions.

But now these banks are increasingly financing deals that don’t involve Japanese companies, the Wall Street Journal reports.

Japanese lenders have been involved in 59 percent of global M&A loan packages this year, up from 46 percent last year and a long-time high, according to data provider Dealogic.

That means they have contributed at least a piece of US$473 billion worth of global M&A financing such as syndicated loans.

Japanese lenders have helped finance some of the year’s biggest deals.

They included Anheuser-Busch InBev ’s US$104 billion acquisition of SABMiller, announced in October.

The country’s top three banks — Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group and Sumitomo Mitsui Financial Group — said they provided about US$4 billion each to a US$75 billion loan package for that deal.

That represents only a fraction of the big three’s total overseas lending.

The balance of Mitsubishi UFJ’s overseas lending was 42.4 trillion yen (US$352 billion) as of Sept. 30, while Mizuho’s was 22.6 trillion yen and SMFG’s was 20.5 trillion yen.

The banks don’t disclose the exact amounts of their contributions to M&A loan packages.

Still, efforts to ramp up overseas M&A lending are a positive for Japanese banks, said Akira Takai, an analyst at Daiwa Securities/

Takai said the money is mostly going to blue-chip companies with higher investment grades.

“As dollar funding costs rise, financing for deals is more profitable than normal lending,” he said.

With its financial strength, Mitsubishi UFJ, Japan’s largest bank by assets, sees an opportunity to move well beyond financing acquisitions by Japanese companies, said Makoto Kobayashi, head of the banking unit’s financial solutions group.

“We’ve seen increasing number of financing deals for non-Japanese M&A activities this year and I feel our presence has been more recognized,”Kobayashi said.

The bank’s alliance with Morgan Stanley has helped it expand its role in global deal financing, Kobayashi said.

The Japanese bank took a 20 percent stake in Morgan Stanley in 2008, and the two have joint ventures in Japan.

“In global deals that Morgan Stanley advises, we get financing even if they [the companies] are not Japan-related,” he said.

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