MUFG executive rejects report to invest in Lehman

A pedestrian walks past a signboard at a Mitsubishi UFJ Financial Group (MUFG) bank branch in Tokyo February 15, 2007.

TOKYO (Reuters) - Mitsubishi UFJ Financial Group (MUFG) (8306.T) has no plans to invest in U.S. investment bank Lehman Brothers LEH.N, an executive at Japan's largest bank said, rejecting a media report that it was considering taking a stake.

Shares in Lehman rose in after hours trade after The Times of London reported that the core banking unit of MUFG was poised to enter the bidding for a substantial stake in Lehman, and may seek control.

A Korean bank is in stake talks with Lehman but an executive at MUFG said the Japanese bank had "absolutely no plans" to invest in the U.S. firm, which has more than $60 billion of mortgage and mortgage security exposure.

The report is the latest about several potential suitors for the smallest of the major Wall Street investment banks, which is under pressure to raise capital ahead of its results announcement this month as the financial sector reels from the credit crunch.

Citing unnamed banking sources in Tokyo, The Times said MUFG was likely to move cautiously if it did proceed with a takeover and wait until Lehman announced its quarterly results.

Lehman declined to comment on the report. Its shares, which gained 5 percent in the regular trading session, added another 1.6 percent in extended trading.

State-controlled Korea Development Bank has said it is in talks with Lehman over a possible joint investment with other Korean banks, but was unsure whether there would be a deal.

Europe's biggest bank, HSBC Holdings Plc (HSBA.L) (0005.HK), also reported to be interested in Lehman, is unlikely to make a move for Lehman, people familiar with the matter have told Reuters.

Mitsubishi UFJ, valued at around $90 billion, is one of the world's largest banks in terms of assets. It is also considered one of the most conservative of Japan's big banks.

Last month, it bid $3.5 billion to take full ownership of U.S. regional lender UnionBanCal UB.N and is seeking to raise its stake in Japanese consumer lender Acom Co (8572.T).

(Reporting by Taro Fuse and Paritosh Bansal; Editing by Jeffrey Benkoe and Rodney Joyce)