Resona Raises Loan Growth Target on Spending by Small Firms

  • Bank sees business loans expanding 13% more than before
  • Small Japanese companies have `robust capital spending plans'

Resona Holdings Inc. raised its target for corporate loan growth by 13 percent in anticipation of demand for credit by small firms to invest in their businesses.

Japan’s fifth-biggest lender by market value sees loans to companies climbing by 450 billion yen ($3.7 billion) in the year ending March, up from 400 billion yen previously forecast, President Kazuhiro Higashi said in an interview in Tokyo last week. Small and mid-sized enterprises “have robust capital spending plans at the moment, and we see this trend continuing,” he said.

As the most domestically focused of Japan’s largest banks, Resona is counting on loan growth at home to drive net income, which fell 35 percent in the fiscal first half. While Higashi said small firms in some industries are increasing spending, a drop in overall business investment pushed Japan’s economy back into a recession last quarter.

Growth in Resona’s loans to small businesses is at “historically strong” levels, said Higashi, 58. Manufacturers are replacing worn-out equipment, health-care providers are investing in facilities for Japan’s aging population, and logistics companies are building distribution centers to handle an increase in e-commerce, he said.

The growth in credit bodes well for a rebound in the world’s third-largest economy, which isn’t as weak as gross domestic product figures suggest, according to Higashi. “Certain aspects of our business act as leading indicators,” he said.

‘Right Direction’

Prime Minister Shinzo Abe’s policies remain in the “right direction” and need to be given more time to change the mindset of a nation mired in deflation for 20 years, Higashi said.

The country’s GDP shrank an annualized 0.8 percent in the three months ended September, pushing Japan into its second recession since Abe took office in December 2012 vowing to revive the economy with fiscal spending, monetary stimulus and deregulation.

Shares of Resona were little changed at 9:42 a.m. in Tokyo. The stock has gained 2.4 percent this year, less than the 85-member Topix Banks Index’s 15 percent advance.

Resona’s loans to companies for investment in facilities rose 6.4 percent in September from a year earlier. That’s more than four times faster than the 1.5 percent overall credit growth at all of Japan’s so-called city banks, central bank data show.

The bank’s lending to small and mid-sized businesses increased by about 350 billion yen in the 12 months to September to 10.1 trillion yen, making up more than a third of its total loan book, according to its website.

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