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From The Times January 16, 2008
Japan poised to rescue Wall Street banks
In a reversal of fortunes, the big Japanese banks have readied as much as $10 billion to rescue the West's banking titans
Leo Lewis in Tokyo and Tom Bawden in New York
The three wealthiest Japanese finance houses are set to step into the worsening sub-prime carnage as the “silent investment partners” of Wall Street and Europe's stricken banking titans.
Senior sources at the “big three” Tokyo megabanks told The Times that they had readied a combined cashpile of as much as $10 billion (£5 billion) and were open to negotiation with any struggling Wall Street bank that approached them for a cash infusion.
Mitsubishi UFJ (MUFJ), Mitsui Sumitomo Financial Group (SMFG) and Mizuho Financial - banks that have been scarred only very lightly by the sub-prime crisis in the United States - are understood to have already opened preliminary talks with several American firms.
One MUFJ insider said that his firm was planning to compete directly with the leading Asian sovereign wealth funds as a long-term investor in the troubled American banks. The Japanese banks, flush with cash and desperate to find ways of raising their return on capital, are keen to become central players in what some predict will be an all-Asian solution to the sub-prime woes contorting America and Europe.
The interest of the Tokyo megabanks emerged as the fallout from America's sub-prime mortgage problems continued. Merrill Lynch, one of the Wall Street firms hit hardest by sub-prime investment losses, said that it had secured a $6.6 billion cash injection from a consortium that included Mizuho, together with the Kuwait Investment Authority and the Korean Investment Corporation.
Separately, Citigroup announced the biggest loss, of $9.83 billion for the fourth quarter, in its 196-year history and took an $18 billion writedown on its sub-prime investment portfolio, in the largest such loss on record. The world's biggest bank also agreed a $14.5billion capital infusion from investors such as the Government of Singapore, Prince Alwaleed bin Talal and Sanford Weill, a former Citigroup chief executive. The bank took measures to reduce costs, announcing a
41 per cent cut in its fourth-quarter dividend and the loss of 4,200 of its 300,000-strong global workforce.
The Japanese banks' interest in investing in distressed US banking names comes as they are keen to expand their overseas operations after nearly two decades of timid confinement to their domestic market after the bursting of the Japanese bubble.
The ultra-conservatism of the Japanese banks dates from their own financial crisis that came to a head in 2003 with the collapse of several leading players. But by the end of 2006, the banks had mostly paid back the emergency cash with which the Government rescued them. “With the public money repaid, the Japanese banks are under pressure from investors to use their capital more effectively. Banks' managements are being told to look for investments every single day, and they see these Wall Street firms as a good chance to do that,” Shinichi Tamura, a banks analyst at UBS, said.
Citibank, Lehman Brothers and Bear Sterns are among American firms rumoured already to be in talks with Japanese banks, as well as other Asian investors and sovereign wealth funds.
The Mizuho deal represents the first time since 1989 that a Japanese financial house has taken a substantial stake in a “bulge bracket” American or European banking name.
Japan poised to rescue Wall Street banks
In a reversal of fortunes, the big Japanese banks have readied as much as $10 billion to rescue the West's banking titans
Leo Lewis in Tokyo and Tom Bawden in New York
The three wealthiest Japanese finance houses are set to step into the worsening sub-prime carnage as the “silent investment partners” of Wall Street and Europe's stricken banking titans.
Senior sources at the “big three” Tokyo megabanks told The Times that they had readied a combined cashpile of as much as $10 billion (£5 billion) and were open to negotiation with any struggling Wall Street bank that approached them for a cash infusion.
Mitsubishi UFJ (MUFJ), Mitsui Sumitomo Financial Group (SMFG) and Mizuho Financial - banks that have been scarred only very lightly by the sub-prime crisis in the United States - are understood to have already opened preliminary talks with several American firms.
One MUFJ insider said that his firm was planning to compete directly with the leading Asian sovereign wealth funds as a long-term investor in the troubled American banks. The Japanese banks, flush with cash and desperate to find ways of raising their return on capital, are keen to become central players in what some predict will be an all-Asian solution to the sub-prime woes contorting America and Europe.
The interest of the Tokyo megabanks emerged as the fallout from America's sub-prime mortgage problems continued. Merrill Lynch, one of the Wall Street firms hit hardest by sub-prime investment losses, said that it had secured a $6.6 billion cash injection from a consortium that included Mizuho, together with the Kuwait Investment Authority and the Korean Investment Corporation.
Separately, Citigroup announced the biggest loss, of $9.83 billion for the fourth quarter, in its 196-year history and took an $18 billion writedown on its sub-prime investment portfolio, in the largest such loss on record. The world's biggest bank also agreed a $14.5billion capital infusion from investors such as the Government of Singapore, Prince Alwaleed bin Talal and Sanford Weill, a former Citigroup chief executive. The bank took measures to reduce costs, announcing a
41 per cent cut in its fourth-quarter dividend and the loss of 4,200 of its 300,000-strong global workforce.
The Japanese banks' interest in investing in distressed US banking names comes as they are keen to expand their overseas operations after nearly two decades of timid confinement to their domestic market after the bursting of the Japanese bubble.
The ultra-conservatism of the Japanese banks dates from their own financial crisis that came to a head in 2003 with the collapse of several leading players. But by the end of 2006, the banks had mostly paid back the emergency cash with which the Government rescued them. “With the public money repaid, the Japanese banks are under pressure from investors to use their capital more effectively. Banks' managements are being told to look for investments every single day, and they see these Wall Street firms as a good chance to do that,” Shinichi Tamura, a banks analyst at UBS, said.
Citibank, Lehman Brothers and Bear Sterns are among American firms rumoured already to be in talks with Japanese banks, as well as other Asian investors and sovereign wealth funds.
The Mizuho deal represents the first time since 1989 that a Japanese financial house has taken a substantial stake in a “bulge bracket” American or European banking name.
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