Japan
Japan's bank lending picked up pace for the fifth straight month, the longest period of acceleration since 1995, as the country's economy grew and companies borrowed more to pay for higher-priced raw materials.
Loans excluding credit associations rose 1.6 percent in May from a year earlier, after growing 1.3 percent in April, the Bank of Japan said today. Lending by Japan's 10 so-called city banks, including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., rose 0.2 percent, the first gain in more than a year.
Higher prices for raw materials, coupled with greater difficulty in raising funds through bonds because of the U.S. subprime-mortgage crisis, have made bank borrowing more attractive in Japan. Inflation remained close to a 10-year high in April as soaring costs of food and energy prompted companies to raise prices of hamburgers, pasta and mayonnaise.
“Borrowers continue to mention higher raw material prices as a reason,'' said Michio Kitahara, associate director-general of the central bank's surveillance department. “City banks had a number of big deals last month in areas such as the automobile and shipping industries that helped lending.''
Regional Banks
Mitsubishi UFJ fell 3.5 percent to 1,086 yen at 10:02 a.m. in Tokyo trading, while Mizuho dropped 3.1 percent and Sumitomo Mitsui declined 3 percent. The 85-member Topix Banks Index lost 2.7 percent, compared with a 1.9 percent decline in the benchmark Topix index.
Regional banks, which lend more of their capital to individuals and small companies compared with bigger rivals such as Mitsubishi UFJ and Mizuho, continued to outperform their larger competitors as their loans swelled 3.2 percent in May from a year earlier no fax payday loans.
Increased borrowing by local governments and continued growth in mortgages helped regional banks, according to Kitahara.
Combined earnings at Mizuho, Mitsubishi UFJ, and Sumitomo Mitsui Financial Group Inc., Japan's three largest banks, fell 28 percent in the year ended March 31 as they booked more than 900 billion yen ($8.6 billion) in total subprime-linked losses. Lending income at the three banks in the fourth quarter fell as the Bank of Japan kept interest rates on hold at 0.5 percent since February 2007.
Core consumer prices rose 0.9 percent in April from a year earlier after surging 1.2 percent in March, the fastest rate since 1998, the statistics bureau said in May.
“If oil prices continue to increase, that will put pressure on profits and make companies more cautious about investment'' and borrowing, said Naoko Nemoto, an analyst at Standard & Poor's in Tokyo. “As long as sales are increasing,'' lending may grow, she said.
Lending growth for all banks may be about 1 percent this year, excluding loans to the public sector, S&P's Nemoto said. Growth may slow in the second half of the year, she said.
Filed under: economics by Wolf