Mitsubishi UFJ Financial Group Inc’s brokerage unit may invest in Taiwan’s Yuanta Financial Holding Co (元大金控) and South Korea’s Daewoo Securities Co as part of a push to double overseas revenue, the head of the division said.
“We are now talking about a new business alliance” with Yuanta, Yasumasa Gomi, chief executive officer of Mitsubishi UFJ Securities Co, said in an interview with Bloomberg Television. “We want to strengthen our relations with Daewoo Securities.”
The talks with Yuanta, owner of Taiwan’s largest brokerage and Daewoo, South Korea’s third-biggest securities firm by market value, could lead to investments in the two companies, Gomi said.
Mitsubishi UFJ Securities aims to increase the share of overseas revenue to 40 percent from about 20 percent now, Gomi said. The company has invested more than US$1 billion in the past two years in five companies from China to Singapore, vying with local rivals including Daiwa Securities Group Inc for acquisition targets in faster-growing Asian economies.
Acquiring overseas securities firms also offers a way for Mitsubishi UFJ, armed with about US$31 billion of cash and cash equivalents, to counter a lack of lending growth in Japan.
“The mega-banks are probably going to be looking much more overseas,” said Brett Hemsley, an analyst at HSBC Holdings Plc in Tokyo. “They’re going to be generating capital in excess of what they can reasonably deploy at home.”
The Tokyo-based brokerage Kim Eng, wholly owned by Mitsubishi UFJ, may buy a stake in Yuanta as part of an alliance including private banking, Gomi said. He declined to elaborate on the size of the potential investments in Yuanta and Daewoo.
Mitsubishi UFJ Securities raised its holding in Kim Eng Holdings Ltd, Singapore’s largest publicly traded brokerage, to 14.6 percent last month by buying an 11 percent stake for S$166 million (US$121 million).
Yuanta is Kim Eng’s biggest shareholder.
The Japanese brokerage set up an alliance with Daewoo Securities in January last year in investment banking and corporate finance, as part of its efforts to tie up with the biggest domestic financial institutions in each Asian market, Gomi said.
Mitsubishi UFJ Securities’ profit tumbled 82 percent to ¥8.1 billion (US$78 million) in the year ended March 31, as trading revenue, fees and commissions declined in a market slump triggered by the US subprime-mortgage crisis.
Still, the unit didn’t invest in subprime-related securities, sidestepping the plummeting valuations that caused ¥413.3 billion in trading losses at rival Mizuho Financial Group Inc’s securities arm.
Kim Eng, one of the largest brokers in Indonesia, Thailand and the Philippines, will help Mitsubishi UFJ extend financial services to Japanese and foreign companies operating in those markets. The two firms aim to set up a S$1 billion fund to invest in Asian equities by the end of next year, they said in a joint statement in November.
Mitsubishi UFJ fell 1.7 percent to ¥1,070 at the 3pm close of trading in Tokyo. Yuanta fell 1.6 percent to close at NT$27.20 on the Taiwan Stock Exchange. South Korea’s markets were closed yesterday for a holiday.