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Wed, Jan 18, 2006 - Page 12 News List

Japan's megabank hopes to establish a global presence

NY TIMES NEWS SERVICE , TOKYO

The Mitsubishi UFJ Financial Group stands apart from most other Japanese banks -- and not only because it is the world's largest privately owned bank.

It has been going on the offensive since Nobuo Kuroyanagi took over as president in 2004, even as many of the country's big banks have appeared rudderless since finally cleaning up a decade-long bad loans mess.

Kuroyanagi beat a rival suitor to acquire UFJ Holdings, another large Japanese bank, last year. More recently, he has increased his bank's presence overseas, particularly in fast-growing Asia.

"The UFJ merger was our first step into the new era after bad loans," Kuroyanagi, 64, the chief executive of the newly merged bank, said in an interview.

The next step may come in China, where Japanese news reports have said the bank is negotiating to take an equity stake in the Bank of China that could be worth US$500 million.

Kuroyanagi said Mitsubishi had been in talks with the Chinese bank, the country's second-largest lender, but he refused to reveal more.

Analysts say the new megabank, with about US$1.6 trillion in assets, still has serious problems, including an overly bureaucratic corporate culture and low profitability.

But they also say Kuroyanagi has succeeded in helping to give the company a clear sense of direction.

It took most Japanese banks years to whittle down the tens of billions of dollars in unrecoverable loans left on their books after the collapse of a real estate bubble in Japan's overheated 1980s. They finally succeeded in the last two or three years, helped by the strongest recovery in Japan's economy and its property market since the crash in the early 1990s.

But analysts criticize most banks for failing to find new, more profitable -- and less risky -- ways of doing business. Instead, analysts say many have gone back to lending heavily to real estate development companies and investment funds, as the rebounding economy has touched off a construction boom in Tokyo.

"If the economy stalled, Japanese banks would have a bad loan problem all over again," said Naoko Nemoto, an analyst for Standard & Poor's in Tokyo.

Nemoto estimates that banks loaned ?1.6 trillion (US$14 billion) to real estate developers in the six months that ended last September -- half of all new bank lending in that period.

Most Japanese bank executives say the answer lies in increasing fee revenue by selling depositors more mutual funds, insurance plans and foreign exchange accounts.

Kuroyanagi said he believed that acquiring UFJ, which had a large network of retail branches, would help Mitsubishi one day become as profitable as large US banks like Citigroup.

He also said he wanted his bank to rival Citigroup as a global player. While most Japanese banks have shrunk or even closed overseas operations, Mitsubishi is looking to grow in Asia by financing the overseas operations of Japanese manufacturers such as Sony and Honda Motor.

"We want to be one of the top five banks in the world," Kuro-yanagi said.

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