Mitsubishi UFJ to Expand in India, Receives License in Russia

Mitsubishi UFJ Securities (Tokyo: 8615) the securities arm of Mitsubishi UFJ Financial Group (MTU) has signed an MOU with ICICI Bank (IBN), India's second largest bank. Separately, Russia's daily Kommersant reports the Russian central bank has issued a banking license to Mitsubishi UFJ Bank. And some legal news follows directly below that could possibly lead to a buying opportunity.

First, Mitsubishi UFJ Financial Group's ordinary shares (Tokyo: 8306) lost 2.47% today to close at 1.58 million yen ($13.51 ADR equivalent). Although the overall market was down I believe news that Sumitomo Trust & Banking (Tokyo: 8403) will seek damages of 14.7 billion yen ($126m) from Mitsubishi UFJ prompted selling. Sumitomo announced its intention in the second round of oral proceedings in an appeal case regarding its failed attempt to merge with UFJ Group in which the latter merged with Mitsubishi Tokyo instead (now Mitsubishi UFJ).

I am waiting for more news and analyst comments on the Sumitomo appeal request for damages. At this time I don't think the court will overturn and if it were to I don't think it warrants a sell-off since Mitsubishi UFJ forecasts full-year net income of 750 billion yen ($6.4 billion).

Next, a statement by Mitsubishi regarding its MOU with ICICI can be read here (pdf format).

M&A seems to be the main target between Mitsubishi and ICICI, as well as pursuing opportunities in corporate finance and asset management. A Japanese language article by the Nikkei Shimbun points out the improving quality of Indian companies and the rapid growth of the Indian economy as important factors behind a partnership. Not to mention the Group's bank already does business in India and would have a role in the partnership. As of last September Mitsubishi UFJ Financial Group owned 61.2% of Mitsubishi UFJ Securities.

Lastly, Russia's Kommersant.com reports the nation's central bank has issued a banking license to Mitsubishi UFJ. ZAO Bank of Tokyo-Mitsubishi, its wholly-owned subsidiary is the actual recipient and the first among Japan's three mega banks to enter Russia. It is believed the bank will focus on corporate clients -- likely providing services to Japanese companies doing business in Russia -- and investments before expanding into retail.

Recommended reading:

Bigger Dividend Payout on the Horizon at Mitsubishi UFJ (Aug. 23rd -- see the links at the end of the article for more on MTU)

Mitsubishi UFJ Financial Group (MTU) 1-year chart:

Comments

[pascal jean...:]

You mentionned 'As of last September Mitsubishi UFJ Financial Group owned 61.2% of Mitsubishi UFJ Securities.', well as you know today's big news was the fact that MUFJ has decided to buy back 100% of MUFJ securities and therefore delist the sub form TSE. This is a very interesting move which can be translated as MUFJ considering its securities arm a sufficiently strategic asset to fully incorporate it with the group. Obviously this is a positive developement for MUFJ. This move also perfectly illustrate the more wider picture regarding Japanese parent companies new strategic view toward their listed subsidiaries : in short fully buy them out (and therefore delist) or sell them off. You can be sure than from the second quarter (september) such buy back/spin-off will increase substancially as Japanese management is keen to hear the arguments of the buyers investing in the parent companies. I feel this is also part of a more wider movement toward corporate governance principles in some way. In today's newsletter I mentionned an interesting article in the Nikkei Financial daily which stressed that some groups like Hitachi (but I would personnally add Matsushita or Toshiba nor to mention other listed groups like Nippon Steel) still have a plethoric number of subsidiaries (listed or not) and obviously target to 1- either totally buy back to increase consolidated earnings or 2-sell them off. The second option will soon be facilitated by TSE new set of rule to ease sell-off (or buy back) listed subsidiaries. Considering buyout funds are now knocking at japan's doors this precise business field will soon become hot.
I would specially take a close look at what Matsushita will decide regarding its corporate galaxy. In the long term obviously it sounds positive for the parent nor to mention Japanese retail investors if they screen with accuracy the next candidates for sale as listed subsidiaries fundamental ratios (Per, Pbr etc..) are usually less than the parent.

2006 Aug 29 04:04 PM