Japanese banks have been more aggressive than their Chinese peers in expanding abroad since the global financial crisis, the IMF said in a report that also highlighted differences in their approaches.
Banks in both nations have used their strong balance sheets to seize growth opportunities overseas as European and US lenders retrench from Asia, the IMF said in its Global Financial Stability Report.
Yet Japanese banks expanded on a larger scale and diversified their businesses, making them less vulnerable to funding issues, the report showed.
Driven by limited growth prospects at home, Japan’s three biggest banks increased overseas loans to more than 31 percent of their total advances in 2013 from 18 percent in 2009, the IMF said.
Chinese lenders expanded loans abroad to 9.2 percent from 6.1 percent in the period, the IMF said.
Chinese banks have been opening foreign offices and branches, mainly to follow overseas expansion by their Chinese customers, the IMF said.
In contrast, Japanese lenders have been making acquisitions, spending more than ￥1 trillion (US$8.3 billion) from 2012 to last year on targets ranging from banks to asset managers, it said.
Mizuho Financial Group Inc is among Japanese banks that are diversifying revenue sources by increasing fee income, while Chinese lenders are focusing on interest income from loans to compatriots’ foreign units, potentially limiting their ability to expand, the report found.
With loans growing faster than deposits, Chinese banks have become more reliant on wholesale funding to fill the gap, making them vulnerable to currency and liability “mismatches,” the IMF said.
The average ratio of overseas loans to deposits at China’s four biggest banks rose to more than two from about 1.5 in the past five years, it said.
The ratio of total liabilities to deposits abroad, a measure of banks’ dependence on funding sources other than customers’ savings, has been climbing steadily since 2009 for Chinese banks, while the portion for Japanese lenders declined, the report said.
Agricultural Bank of China Ltd (中國農業銀行), the least globalized among the country’s largest banks, drove the increase in the loan-to-deposit ratio after embarking on aggressive strategies to expand overseas, the IMF said.
The ratio for Bank of China Ltd (中國銀行), the most international of the four, was less than one.
Lenders from both countries continue to look abroad to reduce reliance on their home markets.
“Growth opportunities still abound for both Chinese and Japanese banks, as their domestic clients increase their outward expansion,” the IMF said.
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