Japan: Eyes On A Banking Prize
While studying economics at the University of Tokyo in the early 1960s, die-hard soccer fan Nobuo Kuroyanagi claims to have played the game nearly every day for four years. That kind of tenacity serves him well today as he aims to mold Mitsubishi Tokyo Financial Group Inc. (MTF ) into a championship contender.
All signs are that the 63-year-old Kuroyanagi, a lifelong MTFG employee who took the field for the bank's soccer team until he was 35, still has a keen eye for the goal. And that makes him a natural for this year's list of financier Stars. In February, MTFG finalized a friendly merger with UFJ Holdings Inc., Japan's fourth-largest bank. The $29 billion deal, set to be completed in October, will put Kuroyanagi at the helm of the world's largest bank, with assets of $1.75 trillion. Kuroyanagi succeeded MTFG's former chief, Shigemitsu Miki, as president in June, 2004. Since joining MTFG's forerunner Mitsubishi Bank in 1965 at age 23, Kuroyanagi has worked in a range of positions, from branch manager to head of the bank's U.S. operations.
Now, Kuroyanagi is plotting to make the new bank as profitable as its international peers. By 2008 he wants the two banks' combined earnings to top $10 billion and boast a market capitalization among the top five globally. That sounds ambitious, since the average return on assets at Japan's big banks is just 0.3%, compared with over 1% at Citigroup (C ). But times are changing. In May the Financial Services Agency announced that Japan's bad-loan problems have been "normalized," while net profit for the top seven banks combined topped $6.8 billion, marking their first return to the black in four years. MTFG posted net profits of $3.1 billion for the fiscal year ending in March, 2005. It was the first Japanese megabank to hit a government-imposed target of halving its bad-loan ratio. Now, MTFG's is down to 2.7%. "We've had tough times, but the banking industry has recovered," Kuroyanagi told reporters at a briefing in May.
At the top of his agenda is retail banking. Kuroyanagi wants to raise the proportion of profits generated by the bank's retail business -- an area where UFJ is relatively strong -- from 15% today to over 35% within three years by strengthening its credit-card, mortgage, and other consumer-lending businesses. Meanwhile, Kuroyanagi hopes that increased lending to small and midsize companies can offset falling credit demand from the giants of Japan Inc.
Cost-cutting will also be important. MTFG wants to find savings of $2.2 billion as part of the merger via the closure of 270 branches and the elimination of 6,000 jobs. Analysts say they welcome MTFG's aggressive approach. "In the old days management at MTFG was very conservative, but the merger with UFJ shows they're changing," says Hironari Nozaki, an analyst at Nikko Citigroup Ltd. (C ) in Tokyo.
Many analysts think Kuroyanagi is just the man to get the best out of the two banking behemoths. In a gesture toward maintaining morale at UFJ, MTFG revealed in May that almost 40% of 104 new middle-management positions at the combined group will go to UFJ employees. Moreover, Kuroyanagi seems to have the common touch: After MTFG announced his appointment in the spring of 2004, he sent out an e-mail titled "Kick Off!" to each of MTFG's 40,000 employees telling them he felt like the "captain of a soccer team" and encouraging the staff to pull together. In banking, this soccer captain plans a lot more goals.
By Ian Rowley