Japan’s regional banks entering project financing industry to tap overseas boom in infrastructure projects

Japan’s regional banks are strengthening overseas project financing operations to meet growing demand for funds needed to pursue infrastructure and energy development projects.

Cases in which they teamed up with the state-backed Japan Bank for International Cooperation to extend joint loans to small firms tapping emerging markets rose over fourfold to 33 in fiscal 2016, from just eight in fiscal 2012.

Japanese banks are looking to make inroads in overseas markets as their profits get squeezed by the Bank of Japan’s negative interest rate policy. The push comes at a time when demand for funds is growing in Asia and the Middle East to build infrastructure.

JBIC is increasing efforts to offer seminars to regional banks to help them join international financing projects.

“Regional banks tend to take a cautious attitude in regard to language barriers and geopolitical risks, but they have become enthusiastic through our seminars,” a JBIC spokesman said.

Among recent financing deals, Iyo Bank, based in Ehime Prefecture, joined a ¥163 billion ($1.47 billion) syndicated loan in 2017 for building a hospital in Turkey.

Gunma Bank, Chiba Bank and Iyo Bank bought the loan contracts of an electric power company operating in Asia in 2016, aiming to garner interest income.

“We would like to broaden our chance to gain profits from overseas projects in which Japanese companies are involved,” a Chiba Bank official said.

Shizuoka Bank and Chiba Bank participated in a $7.4 billion joint-financing deal to build a liquefied natural gas development project in the United States in 2014, according to JBIC.

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