Sumitomo Mitsui Trust Targets 32% Increase in Overseas Loans

Sumitomo Mitsui Trust Holdings Inc. (8309), Japan’s fourth-biggest bank by market value, plans to expand overseas loans by 32 percent this year as it buys assets from European lenders and provides infrastructure loans in Asia.

The target would add 900 billion yen ($11.4 billion) to the bank’s 2.8 trillion yen in lending abroad as of March 31, Shigeki Tanaka, general manager of wholesale business planning, said in an interview on June 18. Sumitomo Mitsui Trust aims to buy 300 billion yen of assets from European firms, he said.

Japanese banks including Mitsubishi UFJ Financial Group Inc. (8306) and Mizuho Financial Group Inc. (8411) are gaining assets and market share from European lenders seeking to withstand the region’s debt crisis. With borrowing at home stagnating, Tokyo- based Sumitomo Mitsui Trust wants to meet demand for project financing in Asia and lend to Japanese companies expanding on the continent, Tanaka said.

“We’ve received a slew of offers for assets from Europe including corporate loans and project financing,” he said. “Unlike Japanese megabanks that have deeper pockets to buy large assets, we’ll take smaller ones to build them up and keep our portfolio well in balance.”

Of the projected 900 billion yen increase in overseas loans, 300 billion yen will go to Japanese clients operating abroad, Tanaka said. The remaining 600 billion yen will be lent to foreign customers, including the proposed buyout of assets held by European banks, he said.

Mizuho in Brazil

Mizuho, Japan’s third-biggest lender by market value, said today that it agreed to buy German bank WestLB AG’s Brazil unit to tap demand for infrastructure-related financing. The purchase of Banco WestLB do Brasil SA is pending regulatory approval, Mizuho said, without disclosing terms of the deal.

Sumitomo Mitsui Trust -- formed in April 2011 through the merger of Chuo Mitsui Trust Holdings Inc. and Sumitomo Trust & Banking Co. -- had 22.9 trillion yen of loans outstanding on March 31. Lending abroad made up about 12 percent of the total, with the rest from retail and corporate clients at home.

Shares of Sumitomo Mitsui Trust rose 4.3 percent to close at 221 yen in Tokyo, paring this year’s decline to 2.2 percent. The 84-stock Topix Banks Index (TPNBNK) gained 2.3 percent today and has advanced 6.6 percent in 2012.

Net income will fall 27 percent to 120 billion yen in the year ending March 31 as revenue from bond trading declines, the bank forecast on May 15.

More Asian Loans

Japan’s three biggest banks are taking their largest slice of the Asian loan market in more than a decade as European rivals including BNP Paribas SA and Credit Agricole SA (ACA) retrench. Mitsubishi UFJ, Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho arranged more than 14 percent of loans in dollars, yen or euros in Asia-Pacific outside of Japan this year, heading for the most since Bloomberg began compiling the data in 1999. Sumitomo Mitsui Trust wasn’t in the top 50.

European banks have been building up capital and using central bank loans to endure a sovereign debt crisis that has undermined confidence in the euro and prompted Moody’s Investors Service to downgrade lenders from Spain to Italy to the Netherlands. Cash and near-cash holdings of the 10 largest European banks jumped 77 percent on average in the two years through 2011, data compiled by Bloomberg show.

Buying Assets

Mitsubishi UFJ agreed to buy Royal Bank of Scotland Group Plc’s Australian infrastructure advisory business last November, following its 3.9 billion-pound ($6.1 billion) acquisition of the British bank’s project financing assets in 2010. A group led by Sumitomo Mitsui Financial completed the purchase of RBS’s aviation leasing division this month.

Sumitomo Mitsui Trust agreed in December to buy a 40 percent stake in London-based asset manager NewSmith LLP for 35 million pounds. The Japanese bank has purchased several loan portfolios abroad over the past year, said Tanaka, declining to disclose details because of confidentiality agreements.

Japanese companies are moving factories abroad to combat a stronger yen that is eroding profit and competitiveness.

“More financing needs will stem from Japanese clients that are shifting their businesses to Asia, relocating production bases from Japan and stepping up acquisitions of businesses abroad,” Tanaka said. “Europe’s debt crisis is bringing those loan requirements to Japanese banks.”

To contact the reporters on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net; Takako Taniguchi in Tokyo at ttaniguchi4@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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