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Japan’s largest bank prepares dramatic staff cuts

NEXT-GEN BANKING:MUFG’s strategy to utilize fintech and shift to solutions rather than deposits and loans is a symbol of much-needed banking reform, an analyst said


Japan’s biggest bank is set to undergo its most dramatic reduction in headcount since it was formed after the nation’s banking crisis shook the industry nearly 20 years ago.

Mitsubishi UFJ Financial Group Inc (MUFG) is considering eliminating about 10,000 positions — about 7 percent of its workforce — over a decade as low interest rates and intensifying competition squeeze profit, people with knowledge of the matter said.

That is more than double the 3,500 full-time roles that company president Nobuyuki Hirano last year said the firm would cut from its main banking unit through natural attrition and less hiring.

The bank is seeking to reshape itself by closing branches and boosting technology investment — a strategy that peers at home and abroad are also pursuing as digital advancements transform the financial industry and provide an opportunity to save costs.

“I think this is a big deal,” said Michael Makdad, a bank analyst in Tokyo at Haitong International Securities Group Ltd (海通國際證券). “For banks, fundamentally, their business model needs to change — a lot — and this is a symbol of that.”

Shares of MUFG yesterday rose 1.1 percent to ¥722.6 at the close of trading in Tokyo. The stock is up less than 1 percent this year, trailing the benchmark TOPIX’s 5.1 percent gain.

The drop in headcount could take place over a shorter time frame than the 10 years estimated, the people said, asking not to be identified because the plans are private.

Most of the positions being reduced are within Japan, where strict labor laws make it difficult to fire staff.

MUFG, established in 2005 from a merger, employs about 147,000 people worldwide.

When asked about the plan, MUFG spokesman Taiki Kitaura declined to comment beyond saying that the bank is considering various options such as reducing work volumes by making use of digital technology.

Tokyo-based MUFG announced a “reimagining” strategy last month, saying it would cut ¥120 billion (US$1.08 billion) of costs over several years through initiatives such as using financial technology to add digital banking channels and streamline back-office functions. Excess staff would be transferred to sales and marketing positions.

“As structural problems such as the decline in lending margins and the shrinking and aging population emerge, we need to bring in new technologies as seen with fintech,” Hirano on Thursday told reporters in his capacity as chairman of the Japanese Bankers Association. “We must reform our business model to advance beyond the traditional deposit and loan business with the ability to provide solutions.”

Under the strategy, the bank is also seeking to boost gross profit by ¥180 billion through measures such as shifting thousands of corporate accounts to its banking unit from its trust banking arm in a bid to unify loan oversight and free up resources.

MUFG’s main lending unit had 766 branches in Japan and 75 abroad as of March 2015, according to its Web site. The group projects that net income is to climb 2.5 percent to ¥950 billion in the year ending in March, whihc would be its the first increase in three years.

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