Euromoney June 2008

League tables haven’t looked like this since the 1980s. Rankings for global loan arrangers in the first quarter of 2009, compiled by Dealogic, show three Japanese banks in the top five worldwide – with Mizuho at the top. The trinity of Mizuho, Sumitomo Mitsui Banking Corp and Mitsubishi UFJ Financial Group between them led almost exactly half of the 1,453 loans Dealogic tracked worldwide in that three-month period.

This is partly because of an absence of activity at American and European banks rather than an increase at the Japanese. But it’s still very notable that volumes for the Japanese banks have held up so well. In fact, in some cases they’ve done better than hold up: during the October to December quarter, in arguably the worst climate for global finance in history, Japanese deal volumes went up more than 50% compared to the same quarter in 2007. In the first quarter of 2009, they were down year-on-year for the industry as a whole, but at two of the three megabanks – which account for 90% of the market in Japan – their volumes actually went up.

It’s tempting to think that this shows Japanese banks stepping into the void internationally left by western lenders, but the truth is this is predominantly a story about Japanese borrowing. According to data from ThomsonReuters, 93% of Sumitomo Mitsui Financial Group’s loan proceeds in the second half of the 2008 financial year were in Japan, and 99% of Mizuho’s.

Partly, the strength of domestic activity is a consequence of the closing of Japan’s bond markets to lower rated credits. “Single A companies have seen their bond issuance reduced,” says Mayuko Suzuki in the syndication department of Sumitomo Mitsui. “Therefore they want to arrange more syndicated loans.”
At the same time, the domestic Japanese institutions who typically participate in syndicated loans were not badly hit by sub-prime and their lending appetite did not drop anything like as drastically as elsewhere. “Japanese regional banks, who are the main buyers for the loans, were not significantly damaged and are relatively strong in their capacity to lend,” explains Sadahiro Sato, general manager of the syndicated finance division at Bank of Tokyo-Mitsubishi UFJ, part of Mitsubishi UFJ Financial Group. “Also, Japanese individuals have shifted from investment trusts and stocks to deposits. That means regional banks’ total deposits have increased and they have been looking for a way to invest that.”

They’re still happy enough to take part in lower rated credits. “Of course there are many terms and conditions,” says Takashi Tadokoro, senior vice president in Sumitomo Mitsui’s syndication department. “But we do not have any difficulty in placing or selling loans to investors.”

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