JPMorgan, Citigroup Among Lenders With Japanese Risk, KBW Says
JPMorgan Chase & Co. (JPM) had more Japanese holdings than any U.S. lender and Citigroup Inc. (C) 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, according to David Konrad, an analyst for New York-based KBW, an investment bank that specializes in financial companies. Goldman Sachs Group Inc. (GS) had $33.6 billion, Morgan Stanley held $19.1 billion and Bank of America Corp. (BAC) had $17 billion, Konrad wrote in a note dated yesterday.
Citigroup Inc. 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 banking unit made a $2.17 billion profit in 2010.
The Bank of Japan (8301) 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, dropped 1.55 percent as of 10:50 a.m. in New York, with New York-based JPMorgan down 2.3 percent, Charlotte, North Carolina-based Bank of America slipping 2 percent and Citigroup off 1.8 percent. Morgan Stanley fell 2 percent and Goldman Sachs declined 1.2 percent. Both are based in New York.
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 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.
Jennifer Zuccarelli, a spokeswoman for New York-based JPMorgan, and Stephen Cohen at New York-based Goldman Sachs didn’t immediately comment. Shannon Bell, a Citigroup spokeswoman, and Morgan Stanley (MS)’s Mark Lake declined to comment.
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