Japan's MUFG to leverage Morgan Stanley expertise in wealth management foray

Pedestrians walk past a logo of Mitsubishi UFJ Financial Group Inc. (MUFG) at the company headquarters in Tokyo.
Pedestrians walk past a logo of Mitsubishi UFJ Financial Group Inc. (MUFG) at the company headquarters in Tokyo.PHOTO: REUTERS

HONG KONG (REUTERS) - Mitsubishi UFJ Financial Group Inc (MUFG) aims to tap into the expertise of partner Morgan Stanley and expand into wealth management, as Japan's biggest bank looks for new sources of revenue, its chief financial officer said on Friday.

The lender plans to launch a new wealth management unit in Japan at the start of the business year beginning April 2018, and targets 50 billion yen (S$608.06 million) in annual operating profit within four to five years, Muneaki Tokunari told Reuters.

MUFG's foray into wealth management comes as profitability at Japan's banks is pressured by negative interest rates and tepid corporate demand for cash during a period of weak economic growth.

The new wealth management business will operate under the MUFG brand leveraging the expertise of United States bank Morgan Stanley, of which the Japanese lender is the single largest shareholder with a 23.4 per cent stake, Mr Tokunari said.

"We would introduce some wealth management knowledge and expertise from Morgan Stanley, because they have successfully expanded their wealth management business (in the United States)," he said. "We have seconded many young recruits to Morgan Stanley to get some hints, to get some expertise from their wealth management business."

MUFG and Morgan Stanley already have a flourishing brokerage joint venture in Japan, stemming from a US$9 billion lifeline the Japanese lender provided the Wall Street bank at the height of the financial crisis at the end of the last decade.

The venture, Mitsubishi UFJ Morgan Stanley, was ranked second for Japanese mergers and acquisition advisory in 2016, and third for equity capital market underwriting, according to Thomson Reuters data.

Mr Tokunari said the new wealth management business would mainly target MUFG's existing small and mid-sized corporate clients, offering investment products and solutions.

Private wealth rose 1.1 per cent last year in Japan to US$14.9 trillion, and is likely to reach US$16.2 trillion by 2021, showed consultancy BCG's latest Global Wealth Market report.

Of the total, 59 percent is in the form of cash and deposits representing significant opportunity for wealth managers to channel dormant funds into investments, analysts said.

Mr Tokunari also said MUFG would change the name of core banking unit Bank of Tokyo-Mitsubishi UFJ (BTMU) to MUFG Bank from April 1 to "simplify" the brand as it looks to expand overseas to offset slowing growth at home.

MUFG's overseas operations currently account for 40 percent of revenue, and the executive said this could rise to 50 percent in the next five years as it looks for growth opportunities in the United States and the rest of Asia.