Japan's MUFG banks on acquisitions for global rise

Mr Oyamada, who was appointed president and CEO of Bank of Tokyo-Mitsubishi UFJ last Friday, said the banking market in the US remains a focus because of its size and steady growth, while Asia's expanding middle class presents opportunities.
Mr Oyamada, who was appointed president and CEO of Bank of Tokyo-Mitsubishi UFJ last Friday, said the banking market in the US remains a focus because of its size and steady growth, while Asia's expanding middle class presents opportunities. PHOTO: BLOOMBERG

Its main lending unit sets sights on potential buys in Asia and US as headwinds at home force it to expand overseas

TOKYO • Mitsubishi UFJ Financial Group's (MUFG's) main lending unit is eyeing further acquisitions in Asia and the US as part of its longstanding aspirations to become a top global commercial bank, the unit's new president said.

Mr Takashi Oyamada, president and chief executive officer of Bank of Tokyo-Mitsubishi UFJ, said the banking market in the United States remains a focus because of its size and steady growth, while Asia's expanding middle class presents opportunities.

The 60-year old Mr Oyamada was appointed the bank's new president last Friday.

"We'll consider any opportunities for non-organic growth" in the US, he told Bloomberg in an interview, adding that this could involve the acquisition of another "reasonably large" regional bank.

The California-based Union Bank, which became a wholly owned subsidiary of Bank of Tokyo-Mitsubishi UFJ in 2008, had total assets of US$115.4 billion (S$156 billion) at the end of last year. The Japanese bank has a long list of potential acquisition targets among regional US lenders, but is not in any specific negotiations at the moment, he said.

SNAPPING TO IT

The business environment is changing so quickly. Quick decision-making will be crucial.

MR TAKASHI OYAMADA, president and chief executive officer of Bank of Tokyo-Mitsubishi UFJ.

MUFG, Japan's biggest bank, and its competitors including Mizuho Financial Group are expanding abroad as this year's introduction of negative interest rates makes lending even less profitable in a country where the economy and population are shrinking.

Bank shares are the worst performers in Japan this year. Mr Oyamada is among executives who are predicting a tough 12 months ahead for the industry.

In an interview with The Wall Street Journal, he said the biggest risk for his bank may be the instinct to retreat into a protective crouch. "The business environment is changing so quickly. Quick decision-making will be crucial. If we only stick to a defensive stance, we won't be able to survive."

He said his bank could compete with US banks such as JP Morgan Chase and Citigroup in global operations if it takes advantage of group units in areas like securities and its alliance with Morgan Stanley.

Ms Nana Otsuki, chief analyst at Monex Group, a Tokyo- based online securities firm, said MUFG is right to pursue its overseas acquisition strategy, given the headwinds Japanese banks face at home. "They have no choice but to diversify their sources of profit geographically."

  • Bankers in foreign firms in Japan expect pay rise this year: Survey

    TOKYO • More bankers working at foreign firms in Japan expect their salaries will increase this year, despite their outlook for a weakening economy, volatile financial markets and a stronger yen, according to a survey by Morgan McKinley.

    About 58 per cent of respondents received an indication from their employers that their base salary will rise this year, compared with 42 per cent a year earlier, the recruitment company said. About two-thirds expect pay increases of 1 per cent to 10 per cent.

    The result suggests that foreign financial firms are willing to pay more to keep staff from jumping ship to other companies, including Japan's largest banks, which have been hiring but are not planning to increase salaries in the year that started on April 1.

    "Banks are facing increased competition as an increasing number of professionals, particularly junior ones, are being enticed to move into other industry sectors," Mr Lionel Kaidatzis, Morgan McKinley Japan's managing director, said.

    Some Japanese manufacturers have been recruiting people from the financial industry to gain in-house expertise on how to expand operations abroad.

    Morgan McKinley based its survey on the responses of 375 employees of more than 40 mainly foreign financial firms, which it did not identify.

    About 47 per cent of the respondents had a neutral outlook for the Japanese economy over the next 12 months, and 37 per cent were either negative or very negative, citing China's slowdown, turbulent markets and the yen's gains among the reasons, the survey showed.

    About 15 per cent had a positive outlook for the economy.

    BLOOMBERG

Mr Oyamada reiterated the bank's goal of becoming one of the top 10 lenders in the US by deposits, moving up from its current No. 13, according to data compiled by MUFG as of December 2014.

To reach the No. 10 position, the bank would need to increase its deposits by US$67.3 billion to US$182.3 billion, the data shows. On a group basis, MUFG is the fifth-largest bank in the world by total assets, according to separate data compiled by Bloomberg.

The overseas strategy could be risky, according to Moody's Investors Service, which last week said MUFG's overseas portfolio is showing signs of deterioration, in part because of exposure to oil and gas.

MUFG shares rose 0.1 per cent in Tokyo trading yesterday. The stock has dropped 33 per cent this year, in line with the Topix Banks Index.

A version of this article appeared in the print edition of The Straits Times on April 05, 2016, with the headline 'Japan's MUFG banks on acquisitions for global rise'. Print Edition | Subscribe