Mizuho Bank Ltd., part of Japan’s third-largest lender by market value, is considering Australian commercial real estate projects as it seeks to top last year’s $2.5 billion of syndicated loans in the South Pacific nation.
The Tokyo-based bank may grow its commercial property lending in Australia and also plans to increase its debt capital markets business as other rivals hoard local assets, according to Sydney branch general manager Debra Hazelton. While Mizuho was the eighth-biggest lender to the nation’s companies last year, the four largest banks led by Westpac Banking Corp. (WBC) snapped up 55 percent of deals, Bloomberg-compiled data show.
“We would like to be more active in some parts of the property market,” Hazelton said in an interview in Sydney. “Not retail residential, but commercial real estate that is somehow in our already established customers’ portfolios.”
Mizuho wants to broaden its Australian business amid heightened rivalry in local lending, as a cooling mining boom slows the economy. Mizuho’s share of the Australian syndicated loan market dropped to 2.4 percent last year from 3.5 percent in 2012, Bloomberg-compiled data show.
“We have been disappointed that we’ve been scaled back so aggressively,” said Hazelton.
Syndicated loan volumes in Australia climbed to $104 billion in 2013 from $83.4 billion a year earlier, Bloomberg-compiled data show. Competition helped force a 52 basis-point drop in average borrowing costs last year, compared with a 21 basis-point fall in the Asia-Pacific region excluding Japan, the data show. Pricing may dip further before costly capital rules come into effect in 2015, said Hazelton.
“There’s an opportunity for corporates at the moment to be borrowing at these lower thinner margins,” she said. “When people start recognizing some of the impact of the Basel III requirements next year, maybe we’ll see it bottoming and even widening.”
The Reserve Bank of Australia signaled the end of a two-year easing cycle yesterday when it kept the overnight cash-rate target at 2.5 percent. After 2.25 percentage points of rate cuts since late 2011, the central bank is switching stance as home prices surge and inflation accelerates.
Origin Energy Ltd. borrowed the biggest syndicated loan in Australia last year, which Mizuho joined, Bloomberg-compiled data show. Sydney-based developer Lend Lease Group was the second-largest borrower, agreeing $4.2 billion of loans from banks that also included Mizuho, the data show.
Commercial property transactions in Australia surged 62 percent in the last three months of 2013 from a year earlier to $6.4 billion, according to data from broker Jones Lang LaSalle Inc. (JLL) Almost $22 billion of properties changed hands in 2013, up 33 percent from the previous year, the figures show.
“We have various sectors that Mizuho favors and doesn’t favor from a more global basis,” said Hazelton. “I’d like to look at some of those areas and rethink whether the Australian market could be a bit of an exception.”
One of the largest real estate projects under way is Lend Lease’s Barangaroo South on Sydney harbor, a A$6 billion ($5.3 billion) redevelopment of a former container port which will include apartments, shops, restaurants and three skyscrapers providing about 320,000 square meters (3.4 million square feet) of office space, according to the developer’s website.
Asset sales by local state governments and infrastructure investment in projects such as roads, rail and port facilities will also help boost lending volumes in the next two years, said Hazelton.
Australia faces an infrastructure funding gap of about A$300 billion, according to a June government report. Capital is needed for essential projects to prepare for an expected 50 percent surge in population by 2050 and rising demand from Asia for the nation’s exports, according to Infrastructure Australia. The government unit put the value of proposed priority investments at more than A$80 billion.
“We’re going to be hoping to see the impact of the privatization of the semi-governments coming through, as well as some of that social and economic infrastructure spending,” Hazelton said. “That will help the pipeline, but the spreads will continue to be low, or even lower in some cases, next year.”
The bank’s financial year ends in March.
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