Foreign banks are back with a vengeance.
According to the latest American Banker survey, business loans booked at U.S. offices of foreign banks rose 15.5% in the 12 months ended June 30, 1995. That compares to a 13.2% increase in such lending at U.S. banks.
The rise in lending by foreign banks was the first significant growth in three years. Such loans had fallen 5.3%, to $203 billion, in 1993 and remained almost flat in 1994.
Analysts expressed surprise at the sharp increase, especially among Japanese banks.
"I'm not surprised to see the Europeans increasing their lending, since they see this as an opportunity to make their mark in the U.S. market," said consultant Andre Cappon of the CBM Group. "But I am surprised at the Japanese."
He and other analysts noted that Japanese banks have faced capital constraints as a result of their mounting problem realty loans. They were understood to be generally scaling back their presence in the United States.
However, some bankers said they were not in the least surprised.
"If you in any way follow mergers and acquisitions and leveraged buyouts, you'll know that 1995 was a very good year, perhaps even a record year" for lending, observed Serge Bellanger, executive vice president at France's Compagnie Financiere de CIC et de l'Union Europeene.
Similarly, Takeshi Yoda, vice president in Sanwa Bank's planning department in New York, attributed much of the increase to financing for mergers and acquisitions.
"We don't arrange mergers and acquisitions, but we do participate," he said, noting that Sanwa is also increasing lending for project finance and structured finance.
Bankers speculated that big U.S. money-center banks as well as superregionals probably posted similarly large increases in corporate lending.
Foreign banks in the United States focus largely on wholesale lending to corporations and have only a negligible share of the U.S. retail banking market.
Although lending by foreign banks grew faster than at U.S. banks, Mr. Bellanger and others noted that foreign banks are in a much narrower segment of the market, where loan demand was particularly strong.
Foreign banks had been steadily increasing their share of the commercial and industrial loan market. The survey found that business loans totaled $235.5 billion at these offices on June 30, or 33% of total business loans outstanding at all commercial banking offices in the United States. The gain was the largest for foreign banks here since 1988, when business loans at these offices rose 18.6%, to $164.3 billion.
It also was the first time in three years that business loan growth at foreign banks outpaced such growth at U.S. banks. In 1994, business loans rose by only 0.2% at foreign banks here, to $203.9 billion, while rising 3.4% at U.S.-owned banks, to $417.2 billion.
Bank of Tokyo Ltd., parent of San Francisco-based Union Bank, again ranked as the top foreign lender to U.S. businesses, with $15.7 billion of commercial and industrial loans outstanding at June 30 in its 12 U.S. offices, up 19.4% for the year.
Among the top 25 foreign bank lenders in the United States, the largest percentage increase in loans was scored by London-based HSBC Holdings PLC, which posted a 32% jump, to $6 billion.
The findings are part of American Banker's 16th annual survey of foreign banks. The survey gathers data on all commercial banking offices of foreign banks in the United States, including branches, agencies, bank subsidiaries, Edge Act banks, and New York State investment companies.
For the year ended June 30, their deposits jumped 17.7%, to $579.3 billion, the largest gain in eight years. In 1994, deposits had risen 3%.
Spurred by the growth in business loans, U.S. assets at foreign banks rose 10.7%, to $989.1 billion. The figure excludes several hundred million more dollars of loans to U.S. borrowers booked in offshore offices.
The survey found that foreign banks in the United States held 22.6% of all U.S. banking assets at midyear 1995, up from 22% in 1994, and their biggest share since 1992, when these banks held 23.3% of all U.S. banking assets.
Tokyo-based Mitsubishi Bank Ltd., ranked as the top foreign bank in the United States with $50.3 billion of assets in six U.S. offices. It was followed by the Bank of Tokyo, with $48.9 billion. These two banks are merging to form Mitsubishi Tokyo Bank Ltd. on April 1.
For the first time this year, the branch and agency offices of foreign banks also reported their off-balance-sheet derivatives held for trading and hedging purposes.
Deutsche Bank, New York, was the top derivatives trader, with a notional value of derivatives held for trading purposes totaling $398.2 billion at June 30.
Still, analysts and bankers noted that the large increase in lending brings risks. "Banks have been in growth mode for the last couple of years, to the point where several people have asked: 'Is there another asset- quality crisis in preparation?'," said CBM Group's Mr. Cappon.