Japan: Megabanks to issue shares... again
Reluctant investors under pressure to buy, while bookrunners await fee bonanza; Analysts say extra capital will not solve banks’ inherent problems
Japan’s three largest financial groups are likely to raise fresh capital as soon as they can, according to analysts and investment bankers close to the firms. There are concerns over their low tier 1 capital ratios relative to their global peers and the coming proposals of the Basel Committee on bank capital.
Mitsubishi UFJ Financial Group, the largest financial conglomerate in Japan, filed a registration on November 18 for up to ¥1 trillion worth of new stock to be issued within the next year.
The other two megabanks, Sumitomo Mitsui Financial Group and Mizuho Financial Group, are restricted from selling further stock until December and January 2010 respectively under the terms of their most recent equity issuances earlier this year. SMFG raised $9 billion in June, while Mizuho FG raised $5.9 billion in July. Though no official comment has been made by either firm about new equity raising, bank analysts agree that calling on investors for more cash as soon as they are able represents the most likely course of action as banks look to bolster weak core capital reserves.
Despite having raised just under $20 billion in equity between them in the last year, the three megabanks need more cash ahead of Basel II coming into force because of the nature of Japanese banks’ capital bases.