“We need to watch the market carefully, but we are discussing to increase our risk appetite,” Nakahama said. “We are trying to secure profits with traditional loans in this phase of rising interest rates.”
Nakahama, 56, who took over from Masato Miyachi in April, is seeing an increase in demand for business loans in the United States. This year, the lender is on track to rank sixth in U.S. lending, up two places from 2021, and ahead of Goldman and Barclays Plc, according to data compiled by Bloomberg. Japanese lenders have expanded into the United States amid extremely low interest rates and lukewarm loan demand in the country.
In a bid to win more business with institutional clients such as pension funds, private equity firms and asset managers, the bank plans to hire about 10 hedge bankers and portfolio managers in the States. United, Nakahama said. The lender also plans to hire approximately five managing and director level bankers in Asia and approximately 10 in Europe to win business with these clients, although the timing depends on the progress of growth plans and market conditions. did he declare.
MUFG joins smaller rival Mizuho Financial Group Inc. in stepping up efforts to target US revenue. Mizuho wants to hire bankers to expand its business with lower-quality companies and leveraged buyout financing, where returns are expected to be higher, Masahiro Kihara, CEO of Japan’s third-largest bank, said in an interview online. april.
“There is a growing need for loans,” said MUFG’s Nakahama, adding that a slowdown in capital markets leads to increased demand for loans from banks. “In the current environment, issuing bonds is becoming difficult.”
The bank is currently seeing buoyant activity in project finance, led by infrastructure and energy projects, and supply chain finance in the United States, he said. Aircraft financing, which has been hit by a sharp drop in travel during the pandemic, has also recovered, he added.
MUFG, which traditionally catered to manufacturers and traders, is expanding its institutional investor business, one of the bank’s key growth initiatives under a three-year plan that began in April last year. . The bank counts notably BlackRock Inc., KKR & Co. and Carlyle Group Inc. among its institutional clients.
Yet the expansion comes as the success of Japanese banks in taking on Wall Street to offer loans in the United States draws the attention of regulators. Rapid rate hikes by the Federal Reserve have now made dollar funding a critical issue for lenders, putting them at a disadvantage against their U.S. rivals, a senior official at Japan’s financial regulator said last month.
In response, MUFG seeks to create and then sell debt to third parties to tie up less of its balance sheet. Helping fund managers package and sell secured loan obligations — extending funding over relatively short tenors — is important and an area the bank is growing in, albeit cautiously, Nakahama said.
He sees growth potential in providing funding to CLO managers for riskier small and medium-sized business loans – known as middle market loans – which offer a higher yield than the more common widely syndicated loans. .
Nakahama is also looking to expand into lower quality loans, where the returns are higher and the risks greater.
“The conditions are very difficult now,” he said, referring to that market. “They could last until next year, but in the long term we won’t stop our progress.”
(Adds a table, Mizuho’s growth plans in the United States in the sixth paragraph)
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