Japanese megabank groups targeting US companies; Increasing profits through higher interest rates, online banking

Three mega banking groups – Mitsubishi UFJ Financial Group, Inc., Sumitomo Mitsui Financial Group Inc. (SMBC) and Mizuho Financial Group, Inc. – have concentrated on their financial activities in the United States. This is because in the United States they can expect high margins and high profit growth, unlike Japan where interest rates are low.

Although the US economy is in a state of uncertainty, the mega banking groups are taking steps to strengthen their US operations.

Last summer, SMBC launched the digital Jenius Bank in the United States. It is rare for a Japanese bank to offer retail financial services in the country.

Jenius Bank offers online savings deposits and credit services, allowing it to expand its customer base at a low cost compared to operating physical branches.

The bank also plans to launch regular deposit and credit card operations. A special app will also be introduced at the end of this year.

“We can make big profits despite having a small market share in the United States,” said Osamu Yagi, head of the CEO Office of SMBC’s Americas Division, which oversees the group’s U.S. business strategies. “We hope to develop the market with services that are closer to the customers’ lives.”

The three megabank groups’ consolidated net profit exceeded ¥3 trillion for the first time in the fiscal year ended in March, mainly thanks to the strong performance of their operations in the United States and other countries.

The balance of outstanding loans at the three megabanks in the United States grew for the third year in a row to ¥36.2 trillion in the same fiscal year, about 1.6 times the amount of ¥23.3 trillion in fiscal year 2019.

The interest profit margins on the three megabanks’ loans to large companies are about 0.6% in Japan, but more than 1% abroad.

The good performance of the three megabanks can be attributed to their efforts to shift money abroad while improving efficiency by, for example, consolidating branches in Japan, where a negative interest rate policy had been introduced.

In August last year, MUFJ spent about ¥130 billion to increase its stake in US Bancorp, a regional bank based in the Midwest, to 4.39%. MUFJ, which primarily serves U.S. customers on the East Coast, is looking to expand its customer base through US Bancorp.

In December last year, Mizuho acquired US investment bank Greenhill & Co. for about ¥76 billion. Mizuho aims to earn commissions by, among other things, advising on mergers and acquisitions in the United States.

Mizuho, ​​which has focused on investment banking activities in recent years, ranked 10th in the world in investment banking fees last year. It was the first time that Mizuho was among the top 10.

“We have achieved several synergistic effects through the acquisition of Greenhill,” said Mizuho President Masahiro Kihara. “The effects will be further strengthened in the coming year.”