Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, compiled a list of potential acquisition targets in the U.S. as it seeks to expand retail banking operations in the world’s biggest economy.
The bank has spoken with chief executive officers and investment officers from companies on the internal list, said Takashi Morimura, deputy president and group CEO of global banking at lending unit Bank of Tokyo-Mitsubishi UFJ Ltd. The Tokyo-based bank isn’t in discussions with the companies at the moment, he said, declining to name them.
“We’re trying to enhance our network and commercial banking business so if there’s a good target and the timing is good, we would like to do it as soon as possible,” Morimura said in an interview yesterday in Hong Kong.
Japan’s megabanks are expanding lending abroad as the country’s shrinking economy and persistent deflation stifle credit demand and prompt the government to inject fiscal stimulus. Mitsubishi UFJ last month agreed to spend about $740 million in Vietnam’s VietinBank, the biggest investment by a Japanese bank in the Southeast Asian nation.
In the U.S., the bank’s interest in possible takeovers will depend on factors including their branch network and any efficiency gains that can be made, Morimura said.
Mitsubishi UFJ already owns two banks in California as well as a 22 percent stake in Morgan Stanley, the sixth-largest U.S. lender by assets. It spent $3.5 billion in 2008 to purchase San Francisco-based UnionBanCal Corp., where Morimura was once president, and bought Santa Barbara-based Pacific Capital Bancorp for $1.5 billion last March.
Asia remains a strategic focus for Mitsubishi UFJ, Morimura said. The lender expressed interest in buying a stake in Bangkok-based Bank of Ayudhya Pcl from General Electric Co., he said, adding that while its attention was “well received,” discussions haven’t begun.
The company may seek to invest in banks from Indonesia and the Philippines, Morimura said. Mitsubishi UFJ isn’t in talks with lenders in those countries, he said.
Mitsubishi UFJ in December agreed to buy 20 percent of Vietnam Joint Stock Commercial Bank for Industry and Trade, or VietinBank, for 15.5 trillion dong ($744 million). It said the same month it will ally with Myanmar’s Co-Operative Bank Ltd. to tap growing demand for financial services as the nation moves to democracy.
Japanese Prime Minister Shinzo Abe said today that the government will spend 10.3 trillion yen to end a recession, his first major policy initiative to defeat deflation and spur growth since taking office last month.
“It’s natural for banks to be dissatisfied with domestic business growth and expand overseas,” said Hiroaki Hiwada, a strategist at Tokyo-based Toyo Securities Co. “It’s very possible that Japan’s leadership change, an escape from deflation and a weaker yen would turn things around, but problems like the trade deficit and aging population remain.”
Sumitomo Mitsui Financial Group Inc., the country’s second-biggest lender by market value, may issue as much as a record $4.5 billion in dollar-denominated bonds this year to fund overseas loans. Smaller rival Mizuho Financial Group Inc. in June agreed to buy German lender WestLB AG’s Brazil unit for an undisclosed price.
Morimura maintained his target of getting at least 40 percent of profit from overseas within the next few years, from about 30 percent now. The bank plans to hire as many as 3,000 people abroad over the next three years to expand retail banking, he said in April.
“In Japan, from the banking industry point of view, it’s very difficult to achieve high-growth business,” Morimura said yesterday. “The growth in the market is very limited so we want to enhance our overseas businesses.”