September 21, 2010 / 11:21 AM / 7 years ago

MUFG on acquisition prowl for growth

TOKYO (Reuters) - Mitsubishi UFJ Financial Group (8306.T) (MTU.N), Japan’s biggest bank by assets, is looking to buy a 15 to 20 percent stake in a bank in South Korea, Australia or Indonesia to tap the region’s growing economy, a senior executive said.

Tatsuo Tanaka, chief executive of global banking at Bank of Tokyo-Mitsubishi UFJ, the firm’s core banking unit, told Reuters on Tuesday that the bank was also eyeing five to seven midsize and 10-20 small U.S. banks for possible acquisitions.

He added that the bank would wait for more clarity on Basel III capital rules before it goes after a bigger bank.

“In Asia, we are always looking for a target. Not necessarily to acquire but to take a stake,” Tanaka said. “We want to build relationships first as we search for a target.”

MUFG and its domestic rivals Mizuho Financial Group (8411.T) and Sumitomo Mitsui Financial Group (8316.T) have been stepping up their overseas expansion in the face of weak growth prospects at home.

Japanese banks emerged from the global financial crisis less scathed than some of their western rivals, but their main lending activities remain sluggish as businesses and households curtail spending amid economic uncertainty.

Earlier this month, Mizuho, Japan’s No.2 bank, said it was looking to acquire commercial banks in Asia to expand in the fast-growing region, while expressing little interest in buying a U.S. bank.

Tanaka, 61, joined the Bank of Tokyo in 1973, rising through the ranks of corporate finance and overseas operations, including a stint in Hong Kong.

He was born into a family of laywers and received a law degree from Japan’s prestigious Keio University, looking to follow in the footsteps of his father who rose to become a Japanese supreme court justice.

But his global aspirations lured him to banking.

“A job as a lawyer was too domestic, I thought,” he said.

MUFG is one of Japan’s most active lenders in overseas expansion with a sizable presence in the United States. It bought out UnionBanCal Corp, a holding company of California-based Union Bank, in 2008 and spent $9 billion for a 21 percent stake in Morgan Stanley (MS.N) at the height of the financial crisis.

In April this year, MUFG bought two small failed banks through Union Bank under an agreement with the U.S. Federal Deposit Insurance Corp.


In Asia, where regulations make outright acquisitions difficult in many countries, Tanaka said the bank would seek minority stakes in regional banks to tap their networks.

It already holds small stakes in a few Asian banks, including Malaysia’s CIMB (CIMB.KL) and Hong Kong’s Dah Sing Financial Holdings (0440.HK).

    Tanaka said a deal to buy a 15 to 20 percent stake in a bank in South Korea, Australia or Indonesia may come as early as next year.

    Analysts say potential targets in South Korea are Woori Finance Holdings 053000.KS and Korea Exchange Bank 004940.KS, which are both on sale by their top shareholders.

    For Australia, analysts raised the possibility of Bendigo and Adelaide Bank (BEN.AX) or Bank of Queensland (BOQ.AX), while Bank Central Asia (BBCA.JK), Bank International Indonesia (BNII.JK) and Bank Panin (PNBN.JK) were flagged as likely targets in Indonesia.

    “The option for MUFG is to go after midsize banks. I think Bank International Indonesia and Bank Panin are possibly the likely option now as I heard that Maybank may put the bank on the market again while the Gunawan family in Panin is still looking for buyers who are willing to pay a premium price for their majority stake,” said Teguh Hartanto, a senior banking analyst at PT Bahana Securities in Jakarta.

    Bank International Indonesia is controlled by Malaysia’s Maybank (MBBM.KL) while Bank Panin is controlled by Indonesia’s Gunawan Family. In June, the Gunawan Family canceled an auction to sell its 46 percent stake in Bank Panin after receiving bids that were lower than expected.

    MUFG sees China as its biggest growth target but Tanaka said it would mainly seek organic growth there, citing the difficulty of pursuing acquisitions in that country.

    He said the United States was the best market for acquisitions given that regulations on foreign ownership are less stringent than those of other countries.

    Shares of MUFG ended down 1.2 percent at 409 yen before the interview, against a 0.3 percent fall in the benchmark Nikkei .N225 average.

    Additional reporting by Taro Fuse, Park Ju-min, Janeman Latul and Narayanan Somasundaram; Editing by Chris Gallagher and Edmund Klamann

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