Bank of Tokyo to increase Australian lending

Japan’s largest bank could invest billions of dollars to fund Australian home loans through other means.

Bank of Tokyo-Mitsubishi UFJ Ltd has already lent $10.4 billion to Australian companies. It has opened talks with AMP Bank, a mid-tier bank that is part of the AMP Ltd. financial services group based in Sydney, about an alternative to deposits and wholesale funding.

Its talks with AMP Bank are said to be about providing bank funding through a so-called “warehouse” structure. This could help AMP and other non-major banks write mortgages and car loans, and bolster the competitiveness and lending ability of smaller banks.

Warehouse facilities are provided by large lenders to smaller institutions that rely on securitization. The short-term warehouse loans are typically refinanced by issuing residential mortgage-backed securities (RMBS) to institutional investors.
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Analysts believe that if Bank of Tokyo-Mitsubishi UFJ closes a funding deal with local banks, it may lead other Japanese banks to follow suit.