Mizuho in talks to buy RBS North America loan assets

Mizuho Financial Group is acquiring North American loan commitments from Royal Bank of Scotland for $3bn in its latest push to expand lending to non-Japanese blue-chips.

The deal is part of an aggressive overseas push by Japanese lenders as they grapple with shrinking loan margins at home and capitalise on the retreat of European rivals.

RBS's sale of $36.5bn of US and Canadian loan commitments came as it reported on Thursday its seventh consecutive annual net loss. It also confirmed that it has appointed Sir Howard Davies, the former head of the UK financial regulator, as chairman to replace Sir Philip Hampton.

Cash-armed Japanese lenders have been snapping up assets in Southeast Asia, US and Europe with lending margins in their domestic market squeezed by a prolonged period of low interest rates, fuelled further by the Bank of Japan's aggressive monetary easing programme.

Mizuho, Japan's second-largest lender by assets had lagged behind Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, the country's two other megabanks in their international expansion.

Mizuho's biggest outbound deal to date is the $1.2bn purchase of a stake in Merrill Lynch in 2008 during the global financial crisis, according to Dealogic. It also bought a 15 per cent stake in Vietcombank, a large Vietnamese state-owned lender, for $567m in 2011.

SMBC Nikko Securities analyst Shinichiro Nakamura said the overall profit contribution from the purchase of RBS's loan portfolio is likely to be minor, noting that the size is small considering Mizuho's target of expanding its overseas lending by $18bn this year.

"Looking 10 years ahead, the gap with MUFG will expand further unless Mizuho carries out more overseas M&As," Mr Nakamura said.

Rival MUFG has built a presence in the retail-banking market through a $3.5bn acquisition of San Francisco-based UnionBanCal in 2008 and other bolt-on purchases of smaller US institutions.

Instead of large acquisitions, Mizuho has focused on expanding its overseas lending organically. The bank has said it would aim to deepen relations with 50 non-Japanese blue-chips in each of its four regional units outside Japan: east Asia, Asia-Pacific, the Americas and Europe.

RBS, which was bailed out by the UK government in 2008, has turned to Japanese acquirers in the past to unload its non-core assets. In 2012, SMFG bought its aviation finance business for $7.3bn. MUFG also acquired $5.3bn worth of assets in RBS's project finance portfolio in Europe, the Middle East and Africa in 2010.

Once the world's biggest bank with a £2.4tn balance sheet, RBS is now less than half that size as it plans to exit from most of Asia and many other parts of its global operations including those in the US, the Middle East, central and eastern Europe, to refocus on its core UK retail and corporate clients.

In the US, RBS hopes to shrink quickly enough to escape the extra obligations regulators are putting on any foreign bank with more than $50bn of assets in the country. To achieve this, RBS is planning to sell additional stakes in Citizens Financial, the Providence-based retail bank it floated in September.

"The agreement allows for continuity of service for our North American clients associated with this transaction," said Ross McEwan, RBS's chief executive.

Additional reporting by Martin Arnold in London

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation