In a highly sophisticated market dominated by domestic banks, a nimble approach and a keen eye for opportunity can be more important than size. Intesa Sanpaolo’s corporate branch in Tokyo uses its specialist expertise to consolidate existing business and explore new possibilities.
The branch offers a range of corporate services to Italian and international customers doing business in Japan. It relies on deep local knowledge – Intesa Sanpaolo and its predecessors have had a presence in Tokyo since 1972 – to support the management of foreign subsidiaries in the country.
The Tokyo branch also taps into the strength of the international Intesa Sanpaolo network to help Japanese businesses expand abroad.
Rosario Pedicini, the branch’s general manager, moved to Tokyo after heading the bank’s Shanghai branch for several years. The contrast between the two markets could not be more marked.
“China is very production-oriented, so customers are generally ones with factories,” he explains. “It’s a closed market, where regulation creates difficulties for financial flows if they are not strictly related to trading goods. It’s very difficult to have money come in and out.”
Japan, on the other hand, is a highly evolved, liquid market where money flows much more easily. It is also one where consumers have sophisticated tastes and an eye for quality. That means high-end Italian brands are much in demand, a fact that has helped Intesa Sanpaolo find a niche in a market dominated by giant domestic banks such as Mizuho, Mitsubishi and Sumitomo.
“When I travel around, people obviously see that I’m not Japanese and start to talk to me in English,” says Pedicini. “When I say I’m from Italy their expressions change. ‘Ah, Italy!’ For some reason Italy means something and this, of course, represents strong goodwill.”
“It’s tough for us to be competitive with these local giants, but we have the advantage of flexibility and in the fact that we are a small team, so we can react promptly when a customer needs us to”
Prohibitive overheads mean few Italian companies manufacture in Japan, though there are exceptions in sectors such as precision engineering. But most of the Tokyo branch’s Italian clients are in Japan to trade and they reflect the typical flow of imports from Italy to a high-value market like Japan.
“The main sectors are, first of all, fashion, followed by leather goods, so bags and Prada, this kind of thing. Our typical Italian customer is in the fashion business. But we also have customers from machinery manufacture and other sectors,” says Pedicini.
Intesa Sanpaolo Japan provides corporate, trade and project finance, but subsidiaries of larger Italian businesses rarely require significant funding. Instead they rely on Intesa Sanpaolo for local knowledge and market intelligence.
This area of the branch’s business is only likely to increase. An Economic Partnership Agreement (EPA) between the EU and Japan came into force early in 2019 and Pedicini says the early signs are encouraging. There was a 20 per cent increase in Japanese imports from Italy in the first nine months of 2019.
“This increase will probably continue because the EPA will have a gradual introduction,” he adds. “Customs duties will decrease over time. It’s potentially a big step forward for Italian business in the country because Japanese people have a high regard for fashion, quality of life and other things they associate with Italy.”
Intesa Sanpaolo has an obvious advantage when helping Italian companies do business in Japan. But in other areas the Japanese market is dominated by the three major domestic rivals, operating in what Pedicini describes as an oligopoly. Nevertheless, the branch has developed a successful niche by showing an agility that larger competitors find difficult to match.
“It’s tough for us to be competitive with these local giants, but we have the advantage of flexibility and in the fact that we are a small team, so we can react promptly when a customer needs us to,” he says.
That approach helped the Tokyo operation secure one of its biggest deals to date – a syndicated structured finance deal with SoftBank, a Japanese telecommunications business. SoftBank is part of the SoftBank Group, a huge operation that has shareholdings in a variety of international companies and brands, including a 29.5 per cent stake in e-commerce giant Alibaba and a 15 per cent stake in Uber.
The Tokyo branch worked closely with colleagues on Intesa Sanpaolo’s project finance desk in Hong Kong to facilitate the complex deal. This is an advantage of Intesa Sanpaolo’s international footprint: offices work together to provide the specialist services larger businesses sometimes require.
Future expansion for Intesa Sanpaolo Japan is likely to stem in part from the bedding in of the EPA, which will make Japan more attractive to European business. The Tokyo branch is well placed to help more Italian brands exploit Italy’s reputation for quality and culture among Japanese consumers.
At the same time, the branch is also exploring the possibility of exploiting the liquidity of Japan’s capital markets to expand Intesa Sanpaolo’s investment banking business.
“We are now considering, together with Banca IMI (Intesa Sanpaolo’s investment banking arm), whether to expand this business and solutions that can enlarge the market coverage here. Not through a branch, because that would go against regulations, but through a securities house,” says Pedicini.
Other international banks have set up securities businesses in Tokyo with considerable success. For its part, Banca IMI already has a presence in New York and London, and Tokyo might be an obvious next step. “It’s still an idea at the moment, and very much at the preliminary stage, but where there are markets and regulations that support them and the opportunity exists it is a possibility. And the size of the Japanese investor market is huge.”
That’s for the future. In the meantime, Intesa Sanpaolo’s Tokyo branch will continue to forge a path in a highly competitive market by exploiting its agility and speed alongside local knowledge and international reach.
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