Strong growth expected from Japan’s megabanks for 2013/14
(15 February 2013 – Japan) The expansion of Japan’s megabanks, led by the Big Three, will lead to strong overseas expansion, according to a new source.
The source believes the expansion by the Japanese powerhouses will lead to a modest increase in risk appetite.
Growth of up to 20 percent to come from mergers and acquisitions and organic growth has been forecast.
The source expects the modest overseas loans books of the megabanks to grow 10 percent to 20 percent per annum in fiscal years 2013 and 2014 by deploying their abundant liquidity in yen.
Megabanks are likely to look beyond their core customers of large corporate borrowers to maintain growth in the medium-term, in turn putting pressure on their asset quality.
This is mitigated, however, by the banks' demonstrated ability to cover loan impairment losses by net interest revenue and by the gradual improvement of their core capitalization through internal capital generation, providing additional buffers against risk.
The source noted that gross profit from overseas operations were still insufficient to significantly affect total earnings. Total net interest revenue and fee income at the megabanks fell 1.4 percent year-on-year on average, in the first half of fiscal 2013 despite annual growth of 10 percent in overseas operations.
Japan’s Big Three megabanks consist of Mitsubishi UFG Financial Group; Sumitomo Mitsui Financial Group and Mizuho Financial Group.
Growth of up to 20 percent to come from mergers and acquisitions and organic growth has been forecast.
The source expects the modest overseas loans books of the megabanks to grow 10 percent to 20 percent per annum in fiscal years 2013 and 2014 by deploying their abundant liquidity in yen.
Megabanks are likely to look beyond their core customers of large corporate borrowers to maintain growth in the medium-term, in turn putting pressure on their asset quality.
This is mitigated, however, by the banks' demonstrated ability to cover loan impairment losses by net interest revenue and by the gradual improvement of their core capitalization through internal capital generation, providing additional buffers against risk.
The source noted that gross profit from overseas operations were still insufficient to significantly affect total earnings. Total net interest revenue and fee income at the megabanks fell 1.4 percent year-on-year on average, in the first half of fiscal 2013 despite annual growth of 10 percent in overseas operations.
Japan’s Big Three megabanks consist of Mitsubishi UFG Financial Group; Sumitomo Mitsui Financial Group and Mizuho Financial Group.
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