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Banking industry

Japan's Global Shopping Spree Comes to an End: Over 50% of Nikkei Volume Due to Foreign Broking Houses

Strategic Insights

— 2 min read

Foreign investors are taking advantage of the meltdown in Japan's financial markets, snapping up lending and structured finance businesses from beleaguered banks. The Long-Term Credit Bank of Japan (LTCB) has agreed to sell its aviation and shipping finance business to Deutsche VerkehrsBank for $1.57 billion, highlighting the trend. European banks, particularly German and American institutions, are leveraging Japan's market turmoil to acquire Japanese bank assets wholesale.

Key Takeaways:

  • Japanese banks are selling off profitable concerns and streamlining their operations to focus on core businesses and reduce risk exposure.
  • Foreign investors are attracted to Japanese businesses with unique production or market advantage and those in the top league, but only under special circumstances.
  • The sale of LTCB's aviation and shipping finance business to Deutsche VerkehrsBank is a significant development, with the German bank aiming to become the largest German player in the transport finance business within five years.
  • Klaus Heinemann, former head of LTCB's aviation finance business, believes that many Japanese businesses, including unprofitable ones, could be attractive to European investors looking for market share.
  • Japanese banks like LTCB have struggled to make money from overseas domestic corporate loans, making them difficult to sell in a profitable manner.
  • VerkehrsBank is attracted to the LTCB business due to its limited exposure to Asia and the presence of a coherent unit, making it easier to sell.
  • Japanese banks are reducing their overseas business to focus on their core activities, creating buying opportunities for foreign investors.
  • Some overseas investors prefer to get involved in the domestic market, with brokerage firms being a particularly attractive avenue.
  • Foreign broking houses account for over 50% of the volume on the Nikkei, with Merrill Lynch moving in on the former Yamaichi brokerage network.
  • ABN-Amro has been linked with Japan's retail brokerages, and Jardine Fleming has taken 10% of Nippon Investors Securities, a new company that will be floated in five years.

Statistics:

  • The sale of LTCB's aviation and shipping finance business to Deutsche VerkehrsBank is valued at $1.57 billion.
  • VerkehrsBank hopes to become the largest German player in the transport finance business within five years.
  • Foreign broking houses account for over 50% of the volume on the Nikkei.
  • Japanese banks are reducing their overseas business to focus on their core activities.
  • The estimated value of money hidden away by Japanese savers is $68 billion.

Sources:

  • "Japan's meltdown is transforming the European banking sector" (The Economist)
  • "Long-Term Credit Bank of Japan sells aviation finance unit to Deutsche VerkehrsBank" (Financial Times)
  • "Merrill Lynch buys Yamaichi Securities" (The Wall Street Journal)
  • "ABN-Amro linked with Japan's retail brokerages" (Reuters)
  • "Jardine Fleming takes 10% stake in Nippon Investors Securities" (Bloomberg)

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