More and more financial industry executives are finding themselves out of jobs as the global economy lurches into a slowdown, but for bankers in charge of overseas loans at Japan's SMBC things couldn't be better at work.
Flush with liquidity, Sumitomo Mitsui Banking Corp (SMBC) and Japan's other top banks are seeing a surge in loan requests and billions of dollars worth of asset-sale offers as European rivals scramble to trim balance sheets and reduce lending to weather the region's deepening debt crisis.
We are making a cry of pain, in a very good way, said Hideo Kawafune, senior vice president at SMBC's international banking unit.
Clients, whom we did not even dream of doing business with, are now coming to us, he said. SMBC is the core unit of Sumitomo Mitsui Financial Group <8316.T>.
The big three lenders -- Mitsubishi UFJ Financial Group <8306.T>, Mizuho Financial Group <8411.T> and Sumitomo Mitsui -- are ready to take advantage of the situation and drive their overseas ambitions.
It's a very tough situation, but I can also say it's an opportunity for Japanese banks, said Sumitomo Mitsui CEO Koichi Miyata at the bank's earnings briefing this month, referring to the euro-zone issue.
We are building up assets with a focus on Asia and the Americas. It's a chance to increase good assets and expand our customer base, he said.
With European banks putting the brakes on lending due to rising funding costs, the Japanese lenders say international borrowers have come knocking at their doors for loans.
Japanese banks have been getting calls from European blue-chip companies. We're much better positioned than European banks in terms of dollar liquidity, Mizuho CEO Yasuhiro Sato said earlier this month.
In fact, the surge in loan requests, both in bilateral and syndicated loans, is such that some Japanese banks are struggling to keep pace.
In the six months to end-September, overseas loans by both SMBC and Mizuho grew about 17 percent to $122 billion (78 billion pound) and $113.5 billion, respectively, a record for both banks, while their domestic lending showed only weak growth. MUFG also saw overseas loans increase during that period.
Japanese banks have been suffering from sluggish loan demand at home for months as businesses are not spending as much on expanding their operations given the country's weak growth outlook.
As a result, the top three banks have far more money from their deposit clients than loans -- about 262 trillion yen versus 192 trillion yen -- and given their limited exposure to Europe's troubled sovereigns, liquidity is strong.
SMBC bankers said they are also getting offers of asset sales from European peers, with the bank receiving offers totalling more than 5 trillion yen in recent months. Most of those auctioned are loan assets, they said.
European lenders are expected to ditch up to 3 trillion euros of loans to meet new capital rules, ease funding strains and become more profitable, and a flurry of deals showed efforts to deleverage are intensifying.
Bank of Ireland said it was selling project finance loans to SMBC for 470 million euros ($624 million), a discount of 16 percent, as it seeks to shrink itself under an EU-IMF bailout.
SMBC said it has bought, and is in talks to buy, about 100 billion yen in project finance assets from European banks, including the BOI deal.
It is a buyer's market. Some assets are offered at deep discounts. Usually, loan assets are sold at 98-99 on par, but some are offered at 80s. Sellers are desperate, said a banker at one of the top three banks, who declined to be named out of concerns of hurting business relationships.
While Japanese lenders see the situation as a rare chance to buy overseas assets cheaply, all have voiced caution, citing the growing uncertainty over the global economic outlook.
We have to wait to see if (the European problem) spreads elsewhere and becomes a global issue. It's risky to make large acquisitions, said Mizuho's Sato.
We have to be especially careful about assets large in size and long in duration, like project finance, he added.
More stringent bank capital rules are also weighing on the banks' decisions. Japan's top-three banks were named among those deemed 'too-big-to-fail' and would be subject to additional capital requirements.
MUFG President Katsunori Nagayasu said at the bank's earnings briefing this month it is unlikely for the lender to go on a buying spree at least before it is confident it can clear new capital rules.
There is also a widely held view among Japanese bankers that the longer they wait, the better the deals they are likely to see, because Europeans have simply not touched their best assets. Europeans are slow to move, said a top executive at one of the three banks.
Or, they might have learned a lesson from the past. Analysts point out Japanese banks' poor track record, especially the heady 1980s when they actively bought overseas assets.
In terms of risks, we don't have much good memory about Japanese banks' aggressive overseas expansion, said Nana Otsuki, an analyst at Merrill Lynch Japan Securities.
What they need now is calm. They should not pay attention just to the price tag but to more long-term strategic fit when they buy assets, she said.
Anyway, at least for now, bankers are busy handling requests for loans from a new pool of international clients.
We can meet targets by primaries alone now. So, we don't have to buy assets from the secondary market, said SMBC's Kawafune.
Of course, at the same time, we are also wondering if we should just sit out and do nothing when prices (of asset offers) are like this... he said. ($1 = 77.4750 Japanese yen)
(Editing by Muralikumar Anantharaman)