Japan - Japan megabanks rise in credit standings

The European debt crisis has helped Japanese banks rise in international credit standings as they remain relatively stable compared with their US and European peers, according to a press report.

US money market funds, which hold some US$2.7 trillion of assets and invest in short-term securities, are increasing investment in Japanese banks, the business newspaper Nikkei reported on Saturday.

The debt crisis has spurred US money market funds to slash their holdings of European banks' commercial paper and other assets, the Japanese daily added.

The funds' exposure to eurozone banks fell to 9.9 percent at the close of last year, down from about 30 percent in 2009, Nikkei said.

Despite increased dollar supply by central banks at the end of last year, European financial institutions are still finding it difficult to borrow dollars on the same terms as before, according to the report.

For Japanese banks, the opposite has been true.

Sumitomo Mitsui Banking Corp. (SMBC) jumped to number two in Fitch Ratings' ranking of money market funds' exposure to individual financial institutions at the end of December, up from 11th spot in September, Nikkei said.

It marked the first time a Japanese bank reached second place. SMBC ramped up issuance of dollar-denominated commercial paper last autumn.

Bank of Tokyo-Mitsubishi UFJ climbed to number 13.

Japanese banks are also gaining the upper hand in longer-term dollar borrowing, the daily said.

SMBC issued 10-year bonds in the United States last month with a spread of about two percentage points over comparable US Treasury notes. That was about half of the risk premium on bonds sold by Goldman Sachs around the same time.

Last September, Japanese banks' borrowing costs fell below that of French banks, based on London interbank offered rates, or Libor, Nikkei said.

As measured by credit default swaps, the three domestic megabanks – Bank of Tokyo-Mitsubishi UFJ, SMBC and Mizuho Corporate Bank – rank third, fourth and fifth in credit standings among Japanese, US and European banks, the daily said.

Nikkei was citing data provided by Markit Group, a global financial information service.

Japanese banks are channelling dollars into overseas expansion, with a focus on Asia and the United States, the report said.

Their outstanding overseas lending at the end of 2011 was up about 30 percent over a year ago.

AFP

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