Tokyo Star Bank Ltd., the Japanese lender backed by investors including Orix Corp., plans to expand foreign-currency lending for planes and other assets because of rising domestic demand for non-yen savings accounts.
The bank aims to more than double foreign-currency financing to about 5 percent of assets over a decade, from less than 2 percent, Chris Taniguchi, a managing director, said in an Oct. 3 interview in Tokyo. The lender had more than 100 billion yen ($1.3 billion) in overseas-currency savings at the end of July, he said.
Individual savers in Japan have almost doubled their foreign currency holdings over the past five years amid the yen’s 40 percent rise against the dollar and as the country’s central bank holds interest rates near zero percent. Tokyo Star follows Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. in seeking higher-yielding markets left by European banks retrenching amid the region’s debt crisis.
“Our retail deposits in foreign currencies are quite large,” he said. “Savers are doing this because the yen has been strengthening, Japanese interest rates tend to be lower than those in other countries, and it provides diversification for such investors.”
Currency Accounts Surge
The yen gained 0.2 percent to 78.32 per dollar as of 1:17 p.m. in Tokyo from 78.48 yesterday. It touched a postwar high of 75.35 last year.
Foreign currency accounts held at Japanese banks by individuals surged to 5.2 trillion yen ($66 billion) at the end of March, from 2.8 trillion yen five years earlier, according to Bank of Japan data.
Tokyo Star’s assets increased to 2.3 trillion yen at the end of March, from 1.8 trillion yen three years earlier, according to the company.
“The bank needed to come up with a new long-term sustainable growth strategy,” Taniguchi said. Financing aircraft, which are priced in dollars, using U.S. currency deposits, helps Tokyo Star avoid foreign-exchange risk, Taniguchi said. The bank is also targeting export credit agency and quasi-sovereign deals, he said.
Aircraft Financing Deals
The lender has completed four aircraft-financing deals this year, up from one in 2011 when it decided to build an aviation- financing business, he said. Tokyo Star has also helped finance nine export credit agency and quasi-sovereign debt deals, he said.
Japanese banks are targeting aircraft financing and overseas lending as a shrinking population saps growth at home. Mitsubishi UFJ Lease & Finance Co., an affiliate of Mitsubishi UFJ, Japan’s biggest publicly traded bank, yesterday agreed to buy Oaktree Capital Group LLC (OAK:US)’s Jackson Square Aviation LCC for 100 billion yen to add about 70 planes to its commercial fleet.
That deal follows Sumitomo Mitsui Financial’s purchase of Royal Bank of Scotland Group Plc’s plane-leasing unit in June.
European banks such as BNP Paribas SA and Societe Generale SA have retreated from dollar-linked aircraft financing after U.S. short-term funding evaporated last year.
Debt guarantees from the U.S. Export-Import Bank have also made it easier for non-U.S. airlines to access capital markets. Dubai-based Emirates had raised $1.46 billion as of last month under Ex-Im’s bond program, the most of any airline since the program began, data compiled by Bloomberg show.
Tokyo Star has helped finance the purchase of a Boeing Co. 777 on lease to Emirates and AirAsia Bhd. (AIRA)’s purchase of an Airbus SAS A320 this year, Fintan Smyth, marketing director for the global business group at Tokyo Star said in the same interview.
“We’re entering the market at a time where we can really choose what deals to focus on,” said Smyth. “European banks may have done the whole deal before, but now they’re distributing more. They are trying to manage their dollar exposure.”
Tokyo Star is owned by a consortium of Japanese and U.S. banks and financial firms after creditors took control of the company last year from Advantage Partners LLP. Orix, a Tokyo- based financing and leasing company, owns 200,000 preferred shares in Tokyo Star, accounting for 22 percent of outstanding equity, according to the bank’s website.
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