Japanese banks cautiously return to post-crisis Asia

Japanese banks cautiously return to post-crisis Asia

TOKYO (Reuters): Three years after a devastating currency crisis hit the economies of East and Southeast Asia, Japanese banks are cautiously resuming lending to the region through syndicated loans, bankers say.

Japan's banks, long among the biggest lenders to the area, have been more cautious than their Western counterparts about returning, and have abandoned their indiscriminate, volume- oriented approach of the pre-crisis era.

"Japanese banks are increasingly taking a positive stance toward lending in East Asia as confidence returns to the region," said Hideyuki Nimura, general manager of the syndication office at Bank of Tokyo-Mitsubishi Ltd's structured finance division.

Syndicated loans, in which several international banks come together to extend large sums of money to companies, comprise perhaps less than 10 percent of Japan's commercial lending to the region but that share is growing, as banks seek a relatively low- risk means of increasing their exposure in the region.

The volume of new syndicated loans by global banks in Asia surged to $94.28 billion in the first half of 2000 from $48.32 billion in the same period last year, according to Thomson Financial Securities Data.

And Japanese banks are leading the charge.

Fuji Bank arranged the largest volume of syndicated loans in the period with $10.76 billion, followed by Dai-Ichi Kangyo Bank with $8.17 billion and Citigroup with $7.51 billion.

In the late 1980s Japanese banks competed fiercely for lending opportunities in the region, resulting in thin margins for loans to borrowers with high credit risk.

The banks have since grown more sophisticated and are not returning to their quantity-over-quality approach.

"Japanese banks are particularly selective in loans to local enterprises," said Makoto Oshima, general manager of the global finance and investment banking division at Sanwa Bank Ltd

Banks examine not just the credit risk of a company but the credibility of the management and the risk profile, including their track record in repaying previous loans, Oshima said.

They are also taking a closer look at sovereign risks.

"Banks are still reluctant to extend new loans to countries such as Thailand and Indonesia that are behind schedule in their reform plans," said Tomoo Kinoshita, head of the Asian economic research unit at Nomura Research Institute Ltd, a research arm of Nomura Securities.

They are struggling to get loans repaid in those countries in the absence of proper bankruptcy laws that require companies to repay loans with current income, Kinoshita said.

Among the favorite destinations in the current syndicated lending boom are South Korea, the Philippines and Malaysia.

The net result is that Japanese commercial lending to many parts of the region has stopped falling.

"Lending has bottomed out this year for some economies in Asia," Sanwa's Oshima said.

At the end of 1999, Japanese bank claims outstanding to the rest of Asia totaled $65.05 billion, down 24 percent from the end of 1998, according to the Bank for International Settlements (BIS).

That contrasts with slower declines or actual increases in net commercial lending last year by Western banks.