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JPMorgan, Citigroup Among Banks With Japanese Risk, KBW Says

JPMorgan Chase & Co. had more Japanese holdings than any U.S. lender, according to KBW Inc. Photographer: JB Reed/Bloomberg
JPMorgan Chase & Co. had more Japanese holdings than any U.S. lender, according to KBW Inc. Photographer: JB Reed/Bloomberg

March 15 (Bloomberg) -- JPMorgan Chase & Co. had more Japanese holdings than any U.S. lender and Citigroup Inc. counted Japan’s government among its biggest debtors before last week’s earthquake struck, according to KBW Inc.

JPMorgan, the second-largest U.S. bank by assets, has “total cross-border outstandings” of $53.9 billion and $64 billion in commitments, wrote David Konrad, an analyst for New York-based KBW, the investment bank that specializes in financial companies. Goldman Sachs Group Inc. had $33.6 billion, Morgan Stanley held $19.1 billion and Bank of America Corp. had $17 billion, Konrad wrote in a note dated yesterday.

Citigroup has $39.2 billion in Japanese loans, securities and trading assets and the government is the New York-based bank’s third-largest credit position, according to Konrad. Japanese policy makers are struggling to contain investor fears amid nuclear radiation leaks at power plants triggered by last week’s earthquake and tsunami.

“We don’t expect a material credit event,” Konrad wrote in the report. “However, we believe that volatility in the markets may cause volatility in the trading results.”

Citigroup, the third-largest U.S. bank, is the only U.S. lender with a “meaningful retail banking presence in Japan,” Konrad said. The company’s Asian regional consumer unit made a $2.17 billion profit in 2010.

“Citi is comfortable with its exposure to Japan, a country where we have been doing business since 1902,” Jon Diat, a Citigroup spokesman, said in an e-mailed statement. “Our hearts go out to Japan and its people as they cope with the tragic earthquake and tsunami.”

Pumping Cash

The Bank of Japan has pledged to pump more cash into the financial system after injecting $183 billion yesterday. The Topix index of stocks suffered its worst two-day drop since the 1987 crash, according to data compiled by Bloomberg.

The KBW Bank Index, which tracks 23 of the biggest U.S. lenders, was down 0.88 percent at 4 p.m. in New York composite trading, with JPMorgan down 1.5 percent, Charlotte, North Carolina-based Bank of America slipping 1.9 percent and Citigroup off 2.2 percent. Morgan Stanley and Goldman Sachs, both based in New York, fell less than 1 percent.

“Based on our current assessment of the situation in Japan, management believes that the firm’s country exposure is manageable given the types of exposures we have to counterparties in the country,” said Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan.

What’s Included

KBW’s data on cross-border positions includes loans and derivatives and doesn’t account for hedges, the analyst wrote. The category includes holdings such as loans to banks, investment in local franchises and public-sector loans, according to Citigroup’s annual report to securities regulators.

Bank of America’s Japanese holdings equal 0.75 percent of total assets, according to Jerry Dubrowski, a spokesman at Bank of America, the biggest U.S. lender. “So I would describe our exposure as small relative to our total assets,” he said.

Stephen Cohen, a Goldman Sachs spokesman, and Morgan Stanley’s Mark Lake declined to comment.

To contact the reporters on this story: Donal Griffin in New York at Dgriffin10@bloomberg.net;

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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