(Bloomberg) -- Japan’s biggest regional bank wants to hire experts who can help it invest in riskier assets.
Like other listed Japanese companies, Fukuoka Financial Group Inc. is facing pressure from policymakers to boost returns for shareholders. At the same time, investors are watching whether lenders increase their purchases of government bonds, helping make up for reduced buying of debt by the Bank of Japan as it moves away from super-easy monetary policy.
“In the past, the priority for investments was being safe and stable,” said Hisashi Goto, president of Fukuoka Financial, based in the largest city in the major southern island of Kyushu. “But investors are demanding profitability and efficient use of capital. So, we take appropriate risk and seek profits.”
The bank is seeking specialists in alternative investment and equities. “If people with really high skill sets can come, we will pay accordingly,” Goto said in an interview.
One of its big hires last year was Tohru Sasaki, a veteran foreign exchange strategist, who was working at JPMorgan Chase & Co. as its head of Japan markets research. It’s a coup for a regional lender, even a big one like Fukuoka Financial, to hire a well-known banker from one of the global firms.
“It’s like getting a Major League player in his prime,” Goto said. The bank is willing to do similar hires if there are opportunities, he said.
Fukuoka will “gradually” build up alternative assets like private equity and private debt, though it doesn’t have specific target amounts, Goto said. The lender will also increase exposure to equities as a pure investment, as opposed to holding corporate clients’ shares for business relations purposes, he said.
Fukuoka Financial would like to buy JGBs if their yields are at “solidly profitable levels,” Goto said.
Government bonds tend to have the lowest yields relative to other types of debt because they’re perceived to have minimal risk, a factor that may limit demand from investors seeking higher returns.
Fukuoka’s assets totaled around ¥33.5 trillion ($225 billion) as of the end of June, the most among Japan’s regional banks, and it has a ¥5.3 trillion securities portfolio, according to the bank’s data.
Like many other Japanese banks, Fukuoka suffered losses on its foreign bond holdings after a surge in dollar funding costs in the wake of the Federal Reserve’s aggressive interest rate hikes that started in 2022.
It sold overseas debt at a loss and replaced them with higher-yielding alternatives. At the same time, the bank has made floating-rate debt about 70% of its foreign bond holdings so that their yields move in tandem with funding costs, Goto said. It’s done so partly by buying products whose rates are floating, like collateralized mortgage obligations and collateralized loan obligations.
For JGBs, Goto said the bank has been selling long-term bonds and buying short-tenor notes given the outlook for higher interest rates in Japan.
He said the bank isn’t likely to change its cautious stance on both JGBs and foreign bonds in the near future, as it waits to see how central bank policy moves pan out both in Japan and the US.
“It’s not the timing now to ramp up risks in haste,” he said.
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