MUFG sharpens CIB, and Europe is on the menu
As if European commercial and investment banks didn’t have enough problems already with their US competitors eating their lunch, now one of the world’s biggest balance sheets has taken a seat at the table.
If any banks can tell you how to survive decades of low interest rates, it’s Japanese ones. The country's overnight rate has been below 1% since the mid-1990s, and last year, the Bank of Japan became the first central bank to experiment with a negative rate.
Volatility in domestic stock markets and the national currency, low GDP growth, sluggish loan demand and tougher post-crisis capital requirements have only made it harder for Japan’s banks, which have typically relied heavily on domestic lending, to achieve steady earnings growth.
That’s caused the nation’s so-called megabanks to turn their eyes to new horizons. Overseas assets at the big megabanks have grown 94.1% between March 2012 and September 2016, according to Fitch Ratings.
Overseas profits accounted for some 40% of gross profits at the banks in the 2016 fiscal year, up from 30% in 2011. Three have pried their way into the top 30 lead syndicated loan arrangers in Europe in recent years, and top 10 globally, by deal value, according to Dealogic.
It helps that the big Japanese lenders are miles ahead of European banks in terms of asset quality.