3 Major Japanese Banks Eye Australia Home Loan Market

Three large Japanese banks are reportedly eyeing a share of the Australian home loan market by offering lower interest rates while Aussie lenders refuse to pass to borrowers made by the Reserve Bank of Australia (RBA).

The three Japanese lenders that plan to be considering setting up operations in Australia are the Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, the Daily Telegraph reports.

Mark Bouris, a member of the Financial Sector Advisory Council, welcomes the plan of Japanese lenders to offer home loans which he said are what the marketplace needs. He estimates the Japanese banks could eat away 5 to 10 per cent of the market from Australian banks which are veering away from the Reserve Bank of Australia decisions, particularly in passing to consumer overnight cash rate cuts.

Data from the Australian Prudential Regulatory Authority showed that the domestic mortgage sector is currently worth $1.06 trillion which would mean the Japanese lenders need to loan more than $100 billion to get a 10 per cent market share.

Mr Bouris, who also heads the non-bank lender Yellow Brick Road, said the amount would not be difficult for Japanese banks to make available due to the large amount of inexpensive deposits these financial institutions hold because of the savings culture in Japan.

Deloitte Access Economics named on Monday the entry of Japanese banks into Australian as the most significant threats to the country's financial system after the European debt contagion.

Mr Bouris said that with Australia's lending margin at about 2.5 per cent which he considers stable and a healthy level of return, Japanese banks would not hesitate to become a part of the Australian mortgage industry.

The Mitsubishi UFJ Financial Group is Japan's largest banking group and is the world's 6^th largest bank, according to a 2008 Financial Times survey. For that year, the group was ranked 35^th on Forbes Magazine's global corporate ranking list, up from its 40^th rank in 2007.

By market value, it is Japan's largest bank, which resulted from the October 2005 merger of Mitsubishi Tokyo Financial Group and UFJ. At that time, the bank had the largest assets at $1.7 trillion compared to Citigroup's $1.3 trillion. In fiscal year 2010-11, the group reported net profit of $7 billion, up by 50 per cent from the previous year.

MUFJ, which is worth $62 billion, owns a 22 per cent stake in Morgan Stanley as of April 2011.

Besides its planned foray into the Australian home market, Mitsubishi also plans to hike in 2012 its purchase of European bank assets that are building capital to withstand the region's sovereign debt crisis.

Sumitomo Mitsui Financing Group, which is worth $42 billion, was the world's 6^th largest bank, according to the Financial Times Survey, and was 82^nd on Forbes Magazine's 2008 corporate ranking.

The bank is on an acquisition mode. Bloomberg reports that Sumitomo purchased a $7.3-billion stake at the aviation division of the Royal Bank of Scotland Group and plans to also invest $93 million in U.S. investment bank Moelis & Company. The acquisition of more assets overseas is part of the Japanese bank's strategy to take advantage of the rising value of the yen and counter economic slowdown in Japan.

The American bank said Sumitomo's acquisition of a stake in Moelis is an opportunity for the latter to enter Japan as well as an opportunity for Sumitomo's clients in Japan to access the global market.

The Mizuho Financing Group, valued at $35 billion, is the 15^th largest bank in the world, according to the 2008 Financial Times survey and ranked 71^st on Forbes Magazine's list in the same year.

Mizuho logged a $5-billion net profit in fiscal year 2010-11, up 72.6 per cent from the previous year. It was formed from a merger in April 2011 of Dai-ichi Kangyo Bank, Fuji bank and Industrial Bank of Japan and was once the world's largest bank in terms of assets.

Mizuho is planning to buy an investment bank in Asia in a bid to improve slow growth in acquiring equity and debt offerings in the region. Mizuho Chief Executive Officer Yasuhiro Sato told Bloomberg that the group also plans to buy asset managers and hedge funds in Singapore, India and Indonesia and hike the number of bank branches in Asia outside Japan to 50 from 33 within the next five years.

Mizuho has stakes in Bank of America and BlackRock, which Mr Sato said the bank has no plans of selling.