Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, is in talks to buy Morgan Stanley’s trust business, according to three people with knowledge of the matter.
The unit provides trust services for $4 billion of client assets within Morgan Stanley’s wealth-management division, said one of the people, who asked not to be identified while talks continue. UnionBanCal Corp., the Japanese bank’s San Francisco-based unit that already offers trust services, plans to acquire the business, the people said. Nikkei newspaper reported the negotiations yesterday, and said the transaction is subject to U.S. regulatory approval.
Morgan Stanley Chief Executive Officer James Gorman, 54, visited Tokyo this month to meet with Mitsubishi UFJ, the New York-based firm’s biggest shareholder and partner in two investment-banking joint ventures. Gorman has sold smaller units of the brokerage division, which has $1.79 trillion in client assets, as he seeks to cut costs and boost returns.
The people familiar with the discussions declined to say how much Mitsubishi UFJ may pay for the unit.
The business offers fiduciary and administrative services for wealthy clients who want to set up personal trusts. It’s part of Morgan Stanley Private Bank N.A., led by Shelley O’Connor. The assets will continue to be managed by Morgan Stanley advisers, one of the people said.
Morgan Stanley currently offers its trust clients services from its own unit or from Comerica Inc., Royal Bank of Canada, or Advisory Trust Co. of Delaware, one of the people said.
Mika Watanabe, a Morgan Stanley spokeswoman in Tokyo, and Yuji Okumura, a spokesman for Mitsubishi UFJ, declined to comment. The Japanese bank owns a 22 percent stake in Morgan Stanley, according to data compiled by Bloomberg.
Morgan Stanley owns 65 percent of its brokerage venture with Citigroup Inc. and plans to buy the rest this year. The brokerage is the bulk of Morgan Stanley’s wealth-management division, which last quarter posted its highest pretax margin since the venture was formed in 2009.
The firm agreed last month to sell its wealth-management operations in the U.K., Italy and Dubai to Credit Suisse Group AG, divesting a unit with $13 billion in client assets. Morgan Stanley agreed in February to sell its European stock plan services business to Abbotsford, Australia-based Computershare Ltd. for $48.5 million.
Shares of Mitsubishi UFJ, led by President Nobuyuki Hirano, 61, have gained about 85 percent since mid-November, when an election campaign began that ushered Prime Minister Shinzo Abe into office on a pledge to stoke inflation. The benchmark Nikkei 225 Stock Average has advanced 57 percent in that period. Japan’s exchanges are closed today.
Mitsubishi UFJ has stepped up acquisitions in the U.S., buying UnionBanCal in 2008 and Santa Barbara, California-based Pacific Capital Bancorp last year as persistent deflation inhibits loan demand at home.
Other recent deals include its December purchase of Bank of America Corp.’s stake in their private banking venture in Japan. Mitsubishi UFJ’s trust banking unit also agreed to buy a 15 percent stake in AMP Ltd.’s Australian asset-management business in December 2011, after acquiring project financing assets from Royal Bank of Scotland Group Plc a month earlier.
The Japanese bank has been deepening its ties with Morgan Stanley since investing $9 billion in the firm in October 2008 as the U.S. company’s stock price collapsed in the wake of Lehman Brothers Holdings Inc.’s bankruptcy.
The companies in 2010 set up two Japan investment banking ventures. In April 2011, they reached a deal to convert most of Mitsubishi UFJ’s preferred stock in Morgan Stanley, paving the way to eliminate annual dividend payments of $784 million and making the Japanese lender the biggest common shareholder in the U.S. investment bank.