Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, is considering a bid for Bank of New York Mellon Corp.’s corporate trust arm, people with knowledge of the matter said.
The people, who asked not to be identified as the deliberations are private, didn’t say how much Tokyo-based Mitsubishi UFJ may offer. BNY Mellon, the world’s largest custody bank, is working with Goldman Sachs Group Inc. to find buyers for the unit, which could fetch at least $2.5 billion, a person with knowledge of the matter said last month.
Low interest rates and a shrinking population at home are prompting Japan’s biggest banks to expand abroad. Mitsubishi UFJ, which owns about 22 percent of Morgan Stanley and runs San Francisco-based UnionBanCal Corp., is looking to invest in the U.S. and Asia, Deputy President Masaaki Tanaka said in February.
“There’s an advantage of scale in the trust-banking business,” said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc. “If this deal is realized, MUFG would be able to cut costs in their global trust-banking operations and increase profitability.”
BNY Mellon’s corporate trust arm helps companies process payments on debt they issue, and works with investors to recover their money if companies default. With 3,500 employees at 61 offices around the world, the unit services about $12 trillion in outstanding debt for its clients, according to New York-based BNY Mellon’s website.
The business has become less lucrative after the credit crisis made it more difficult to package and sell the loans. BNY Mellon Chief Executive Officer Gerald Hassell is selling assets and cutting costs to boost profitability.
Kazunobu Takahara, a Tokyo-based spokesman for Mitsubishi UFJ, declined to comment.
Mitsubishi UFJ will integrate its U.S. operations under a holding company on July 1, it said in a statement in February. It invested $9 billion in Morgan Stanley in 2008 during the global financial crisis, and spent about $3.5 billion to make regional lender UnionBanCal a wholly owned subsidiary, to strengthen its foothold in the world’s largest economy.
The Japanese lender bought Thailand’s Bank of Ayudhya Pcl for about $5 billion last year, its largest investment in Asia.
BNY Mellon estimates that run-off in the corporate trust unit will reduce annual revenue by $50 million to $75 million, or about 0.5 percent of total revenue, Thomas P. Gibbons, the bank’s vice chairman and chief financial officer, said on a conference call in April, according to a transcript.
The U.S. bank earned $661 million in the first quarter, compared with a loss of $266 million a year earlier that was caused by a tax court decision, as rising stock markets lifted assets and fees for overseeing them.