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* Bank of Tokyo-Mitsubishi UFJ hire bankers who speakSpanish, Portuguese
* Sumitomo Mitsui Banking Corp increasing loans to U.S.municipalities
* Mizuho Corporate Bank pursues overseas M&A financing
By Taiga Uranaka
TOKYO, April 22 (Reuters) - Japan's banking titans arehiring Spanish-speaking bankers to win new business in LatinAmerica and handing out loans to junk-grade borrowers in theUnited States as they probe deeper overseas to fight meagrereturns at home.
Lenders such as Sumitomo Mitsui Financial Group Inc (SMFG) have ramped up overseas lending since the euro zonedebt crisis sent European rivals packing. The move abroad wasgiven a new impetus this month after the central bank unveiled astimulus plan that will plunge Japan into an ultra-low monetaryenvironment, further eroding razor-thin loan margins and cuttingreturns on Japanese government bonds.
Banks including Mizuho Financial Group Inc arepushing ahead to identify new overseas borrowers, includingcorporates with little Japanese connections and naturalresources developers seeking copious funding. Their venturesabroad, while still modest versus their domestic operations,point to their growing risk-tolerance in emerging markets, andit remains to be seen whether their efforts will pay off.
"We now arrange deals that are very different from what weused to do in the past, that is, those with very strong localflavour with no involvement of Japanese companies," saidTakayuki Sakai, chief manager of project finance at Bank ofTokyo-Mitsubishi UFJ, a core unit of Mitsubishi UFJ FinancialGroup Inc (MUFG).
The bank is looking to increase local currency-denominatedlending, such as those in the real, as opposed to the usualdollar-dominated loans, he said.
Bank of Tokyo-Mitsubishi UFJ has been beefing up its projectfinance business in Latin America, hiring specialist bankers whospeak Spanish and Portuguese to gain better access to projectsinvolving exclusively local parties.
Last summer, the bank hired Ralph Scholtz, BNP Paribas'Latin America project finance managing director, as its region'sproject finance team head, as well as a Portuguese-speakingbanker from HSBC Holdings Plc.
The bank said Latin America is a promising market forproject finance, highlighting plans in Mexico to build gaspipelines, and development of copper mines and auxiliaryfacilities such as power plants in Chile.
MUFG does not disclose dollar-based overseas loan data.
Domestic rivals SMFG and Mizuho's outstanding overseas loanstotalled $277 billion as of December, a hefty 66 percentincrease from March 2010.
NON-INVESTMENT GRADE
Sumitomo Mitsui Banking Corp (SMBC), a core unit of SMFG,said a team of its U.S bankers are targeting small andmedium-sized local businesses, including those with creditratings of BB or lower.
The bank declined to disclose interest margins for thosenon-investment grade borrowers. Industry sources say loans toBB-rated borrowers have spreads of 170-180 basis points overA-rated ones.
There is a limit to what banks can earn from loans toclients with a top-notch credit status, said Hideo Kawafune,senior vice president at SMBC's international banking unit.
"Our current loan portfolio is a bit weighted on high creditrating borrowers, and we would like to expand lending tocustomers in the BB+ to BB- class," Kawafune told Reuters.
The bank is increasing loans to U.S. municipalities afterpoaching a public finance team from a U.S. bank in 2008. Recenttransactions include a $209 million loan to New York City WaterFinancing Authority.
Kawafune said loans to non-investment grade corporates andmunicipalities in the United States still represent a smallportion, roughly 10 to 20 percent of the overall loans
But their growth is outpacing the rest of the bank'soverseas lending, he said.
M&A FINANCING
Mizuho Corporate Bank, a unit of Mizuho Financial, saidacquisition financing for non-Japanese companies is likely todrive its overseas loan growth this year.
The bank is working on financing for twomulti-billion-dollar M&A deals involving corporate clients basedin North America and Europe, Mizuho bankers said, withoutelaborating, citing bank-client confidentiality agreements.
Mizuho Corporate Bank said previously it is targeting bigcompanies such as BP PLC, Prada SpA and IBM in the Americas, Europe, East Asia and Oceania.
Kazuya Nakagawa, senior vice president at Mizuho'sinternational coordination division, said M&A finance isrelatively profitable compared to loans to blue-chip companies.
M&A finance is attractive in that it provides short-termloans to borrowers, and so does not tie up the bank's capitalfor long.
It could also lead to additional businesses when theborrower switches to a more permanent mode of financing upon thecompletion of the acquisition, such as issuing bonds, accordingto Mizuho bankers.
