Despite the possibility of a recession in important global economies, Japanese megabanks intend to expand their position in the Asia-Pacific in 2023 through acquisitions.
Mitsubishi UFJ Financial Group Inc., or MUFG, which derives around half of its net operating profit from overseas operations, anticipates closing transactions in Asia-Pacific in 2023 totaling at least 108 billion. Plans to purchase several consumer finance and securities businesses in the Philippines, Indonesia, and Thailand were announced by the bank and its subsidiaries in 2022.
Sumitomo Mitsui Financial Group Inc. is thinking about increasing its stake in a few of its current businesses in Vietnam, Indonesia, the Philippines, and India. Takashi Masatoki, head of the strategic planning department of the bank's global business unit, said that the megabank, which is Japan's second-largest lender after MUFG, aims to increase the net profit from those businesses to $100 billion in the fiscal year ending March 2026 from roughly $60 billion in the current fiscal year ending March 2023.
"If the U.S. economy slows down more deeply, that would increase the risk of economic disturbance in Asian countries," Chizuru Tateno, a credit analyst at S&P Global Ratings Japan said. "The risk of tarnishing the bank groups' earnings and assets will likely heighten."
As their revenue from operations abroad rises after years of expansion, Japanese megabanks' risk and earnings profiles are becoming increasingly subject to global economic cycles. That strategy would result in increased credit costs and earnings losses when the likelihood of a global recession increases, but it would also give Japanese lenders fresh growth engines when their home market is being held back by ultralow interest rates and a decreasing population.