Japanese banks take steps overseas, gingerly

By David Dolan - Analysis

TOKYO (Reuters) - Unburdened by heavy subprime losses, and stuck with sputtering growth at home, Japan's big banks are once again investing and lending abroad, but investors should not expect a string of blockbuster buyouts.

Only a few years removed from a bad-loan crisis that pushed many lenders to the brink of collapse and sparked widespread industry consolidation, Tokyo banks will continue to keep their acquisitions conservative, bankers and analysts say.

Last week Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research), Japan's third-largest bank, said it would pay about $1 billion to take a 2 percent stake in Britain's subprime-scorched Barclays (BARC.L: Quote, Profile, Research).

Earlier this year Mizuho Financial Group (8411.T: Quote, Profile, Research) injected $1.2 billion into Merrill Lynch & Co. (MER.N: Quote, Profile, Research).

Although big news by recent standards, the deals are minor-league compared to the overseas shopping spree of the 1980s, when at one time Japan was estimated to control more than a quarter of California's banking market.

Most of those investments were later sold as Tokyo faltered under mounting bad loans. Now that the subprime crisis has sapped Western financial firms of cash and risk appetite, Japanese bankers acknowledge they have a chance to rebuild overseas.

"We would of course consider investing in financials where capital has been depleted by the subprime," Tatsuo Tanaka, deputy president of the core bank of Mitsuibishi UFJ Financial Group (8306.T: Quote, Profile, Research) told the Reuters Japan Investment Summit this week.

But Tanaka acknowledged that Mitsubishi UFJ, Japan's largest bank, would take a cautious tack in building up overseas.