While U.S. banks bemoan years of near-zero interest rates, our low rates are comparatively attractive when compared to Japan's negative interest rates. In fact, it is part of the reason why Japanese banks are looking to acquire U.S. regional banks.
In an interview with Bloomberg News earlier this week, Bank of Tokyo-Mitsubishi CEO Takashi Oyamada said the bank has a long list of U.S.-based acquisition targets but it isn't currently in negotiations.
In 2008, Bank of Tokyo-Mitsubishi completed its acquisition of California-based Union Bank, paying $3.5 billion for the remaining 35% stake in the company. Oyamada told Bloomberg that another West Coast based bank could offer "synergy benefits" with Union Bank, but a purchase elsewhere in the U.S. would enhance the bank's geographic footprint.
"If Bank of Tokyo wants to be bigger in the U.S., as they have said, then they need to have a bank that serves the best market in the country, California, where there could be a very good cultural fit," Jim Cramer told Real Money.
East West Bancorp (EWBC) and Cathay General Bancorp (CATY), both headquartered in California with operations in China, could fit with Bank of Tokyo-Mitsubishi's previous purchase of Union Bank.
In the current low-interest rate climate, it is not common to hear interest rates spoken of favorably. For example, in his recently released annual letter to shareholders, JPMorgan Chase (JPM) CEO Jamie Dimon called out low interest rates (in addition to higher capital requirements and control costs) among the reasons why the bank's return on tangible common equity has been falling.
But, it can always be worse. While the U.S. is slowly testing the waters of increasing rates, other countries are taking interest rates below zero with negative interest rate policies, or NIRP. To make up for the pressures of negative interest rates, the bank has to look for other ways to drive growth. So far, Bank of Tokyo-Mitsubishi is not planning to charge its customers for deposits in an effort to offset the effect of negative interest rates.
U.S. regional banks have been consolidating in recent years as they contend with lower rates and increased regulation. This era of consolidation could provide an opportunity for Japanese banks to gain better footing on U.S. soil.
In addition to East West Bancorp and Cathay General Bancorp, Real Money has identified a few others that could fit Bank of Tokyo-Mitsubishi needs.
Real Money contributor Tim Melvin suggested three other potential targets: Citizen's Financial Group (CFG), KeyCorp (KEY) and Huntington Bancshares (HBAN). The latter two could be good targets for an acquirer looking to secure a large presence in the U.S.; however, given the size of the banks, they are more likely to capture regulatory attention.
Of Rhode Island-based Citizen's, Melvin said the bank is a "solid target" following its spin out from Royal Bank of Scotland (RBS) last year. The bank has a strong presence in core markets, a great branch presence and the stock is cheap, Melvin added. Citizen's currently trades at 88% of tangible book value, which could suggest it is undervalued.
