Departures of Tokyo-based loan executives from Citigroup and General
Electric Capital Corp highlight the retreat of foreign banks from
Japan's lending market.
Nobuhiko Ito, the head of acquisition finance and syndicated lending at Citigroup in the capital, and Masahiko Horiba, an executive director in GE Capital's structured finance unit, both said last month they were stepping down.
Outstanding loans by foreign banks dropped to a record low 1.85 trillion yen (HK$122 billion) in November as borrowing costs slump, Bank of Japan data going back to 1995 showed.
Stricter financial rules are forcing foreign banks to be more picky about the risk of assets they take on including loans, according to Bank of America.
Japan's interest rates on new loans fell to an unprecedented 0.767 per cent last year as the Bank of Japan accelerated monetary stimulus, squeezing profits on financings in Asia's second-largest economy.
"The big reason that foreign bank loans are decreasing is that it doesn't pay to expand their balance sheets here when they can make much more money in other countries," said Yusuke Ueda, a credit analyst at Bank of America Merrill Lynch in Tokyo.
"They can get better returns than Japan just by going to the money market or corporate bond market in the US."
The average gap between loan rates and funding costs in Japan was 0.14 per cent in the year ended March 2014, according to the Japanese Bankers Association. The average net interest margin in the US in the third quarter last year was 3.14 per cent, according to the Federal Deposit Insurance Corp.
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Nobuhiko Ito, the head of acquisition finance and syndicated lending at Citigroup in the capital, and Masahiko Horiba, an executive director in GE Capital's structured finance unit, both said last month they were stepping down.
Outstanding loans by foreign banks dropped to a record low 1.85 trillion yen (HK$122 billion) in November as borrowing costs slump, Bank of Japan data going back to 1995 showed.
Stricter financial rules are forcing foreign banks to be more picky about the risk of assets they take on including loans, according to Bank of America.
Japan's interest rates on new loans fell to an unprecedented 0.767 per cent last year as the Bank of Japan accelerated monetary stimulus, squeezing profits on financings in Asia's second-largest economy.
"The big reason that foreign bank loans are decreasing is that it doesn't pay to expand their balance sheets here when they can make much more money in other countries," said Yusuke Ueda, a credit analyst at Bank of America Merrill Lynch in Tokyo.
"They can get better returns than Japan just by going to the money market or corporate bond market in the US."
The average gap between loan rates and funding costs in Japan was 0.14 per cent in the year ended March 2014, according to the Japanese Bankers Association. The average net interest margin in the US in the third quarter last year was 3.14 per cent, according to the Federal Deposit Insurance Corp.
Read more Click here / www.trade4x.net
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