JAPANESE KEEN TO ENTER GERMAN PRIMARY BOND MARKET
Japanese securities houses and banks
are eager to enter the market for lead-management of mark
eurobonds when the ban on Japanese institutions is lifted, but
the entry may be difficult, Japanese bankers said.
    Most Japanese securities houses and banks established here
said they have concrete plans to enter lead-management
business, as soon as terms are cleared, probably this year.
    Japan's largest bank, The Dai-Ichi Kangyo Bank Ltd, is also
considering expanding its business here, bankers said.
    Japanese banks were excluded from lead management of mark
eurobonds when the Bundesbank opened that market to foreign
banks in May 1985, due to the lack of reciprocity for German
banks in the Japanese market.
    Last year, the Japanese began a slow opening by granting
West German banks investment licences.
    Pressure on Tokyo stepped up last week when U.K. Government
sources said Britain may revoke the licences of some Japanese
banks and securities firms operating in London when they come
up for renewal if progress is not made towards opening Japan's
markets to foreign competition.
    A spokesman for the Dai-Ichi Kangyo representative office
here said the bank was naturally considering options such as
expanding its mark securities trading operations to Frankfurt.
    Sources at the bank's London branch said the bank was
already seriously planning such a move.
    Expanding secondary operations would also improve the
placement capacity of Japanese houses intending to move into
lead management of mark eurobonds.
    But even Japanese banks already established in secondary
markets here face a host of problems in lead management. One is
finding borrowers.
    One banker at Nikko Securities Co Ltd's The Nikko
Securities Co (Deutschland) GmbH said the cost of mark issues
may be too high for some Japanese firms.
    "For the moment, for Japanese borrowers, marks are
expensive," he said. Many prefer Swiss francs or eurodollars.
    A Japanese borrower with a five-year equity warrant
eurodollar bond issued at 2-1/2 pct can now swap into domestic
yen rates of one pct. But mark swap opportunities are limited.
    In addition, many Japanese companies are committed already
to large German banks.
    To avoid souring relations with German banks they now
cooperate with, Japanese houses may prefer finding borrowers so
far not seen in the mark sector.
    Names may include Sanyo Electric Co Ltd and Nishimatsu
Construction Co Ltd, which both count Yamaichi Securities Co
Ltd as their house bank, or Hokkaido Electric Power Co Inc,
which recently gave a presentation here with the Industrial
Bank of Japan's unit here.
    Japanese banks are also faced with finding local personnel,
which is not easy. "They are definitely going to have a manpower
problem," one Swiss banker said.
    Swiss and American banks had no trouble attracting top
German managers. But Japanese cultural differences will be
harder for Germans to overcome. Success may depend on whether
Japanese parents allow German subsidiaries independence to
operate without interference.
    Once established, more problems are expected if extra
competition shaves margins.
    Extra competition could cut management fees in the mark
sector. Separate management and underwriting fees common here
may also be eroded, which now make German underwriting business
profitable compared with other centres.
    A few banks are unsure if they really want to get involved
in the business. "I don't think Sumitomo has 100-pct concrete
plans at this moment unless there is a new development," a
banker at the West German commercial branch of Sumito Bank Ltd
in Duesseldorf said.
    Apart from the commercial branch in Duesseldorf Sumitomo
has a rep office in Frankfurt, but both are primarily engaged
in commercial banking. If Sumitomo were to set up a securities
operation, it would have to set up a full subsidiary, he said.
 REUTER
