Japan’s SBI Holdings awaits flood of money from regional banks

Japanese financial conglomerate SBI Holdings Inc. anticipates a flood of money from yield-starved regional banks that need help reinvesting cash after redeeming government bonds.

A year-old SBI unit that invests on behalf of local banks should see assets at least doubling to 300 billion yen ($2.7 billion) this year, said Tomoya Asakura, an executive at the Tokyo-based group. “We are seeing very strong demand,” he said in an interview.

Japan’s 100-plus regional banks have been hit by diminishing returns from their domestic securities portfolios after unprecedented monetary easing caused long-term interest rates to tumble. Yields on Japanese government bonds, which used to make up the bulk of their assets, are now negative through 10-year tenors, forcing the lenders to look elsewhere for returns.

And the headache for local banks is only getting worse. About 15 trillion yen, or 40%, of their JGBs and local government notes as of March 2019 are set to mature within three years, Financial Services Agency figures show.

Because many regional lenders don’t have the in-house expertise to pick and manage assets such as overseas bonds, Asakura expects more to seek outside professionals to manage their securities portfolios. Nordic real estate-backed securities and U.S. municipal bonds are among the assets SBI is eyeing, he said.

“They didn’t have to take risks in the past, but now they do,” said Asakura, who heads SBI’s asset management operations. “It’s a great business opportunity for us.”

Asset management is just one way SBI is deepening ties with regional banks. The Tokyo-based firm has been taking stakes in some lenders to help them deal with issues such as pressure on business stemming from the shrinking population.

SBI Regional Revitalization Asset Management Co., the unit that handles local lenders’ investments, started operations in January 2019 and has 13 employees. It currently manages money for 37 regional lenders, which are also shareholders in the unit, including Aomori Bank Ltd. and Yamaguchi Financial Group Inc.

Other firms including All Nippon Asset Management Co. have also started exclusively targeting local banks.

“There is a sense of urgency especially among small banks that something has to be done,” Asakura said.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.