Morgan Stanley wants more from MUFG ties to be top in Japan
The two banks’ partnership dates back to the height of the global financial crisis almost two decades ago
[TOKYO] Morgan Stanley plans to step up ties with Mitsubishi UFJ Financial Group (MUFG) to get more market share across all of its businesses in Japan, the US bank’s local chief said.
“We believe that is the only way we are going to become the top securities house in Japan,” Alberto Tamura said. “MUFG is the largest financial institution here in Japan. Morgan Stanley has a great global platform. If you combine those two, I believe that we have plenty of opportunities.”
Through their two local joint brokerage ventures, the banking giants are looking to strengthen collaboration in wealth management, securities trading and investment banking, he said. They are also discussing doing more outside the securities business, such as in real estate asset management, he added.
Tamura’s ambition takes aim at unseating Nomura Holdings as the leading brokerage in the country. It also underpins how global financial firms are pouncing on Japan’s revival after decades of stagnation, even as they face stiff competition and challenges such as hiring.
Corporate mergers are proceeding at a record pace, while more households are investing and securities trading volumes are rising, creating tailwinds for brokers.
Dislodging Nomura won’t be easy, however. While Morgan Stanley MUFG Securities and Mitsubishi UFJ Morgan Stanley Securities are gunning to overtake Nomura’s flagship local brokerage subsidiary in terms of combined net revenue, the gap has widened in the past two years.
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Pressure will also come from its Wall Street rivals. JPMorgan Chase’s local brokerage earned more net income in Japan than any other global rival in the year ended March. While Morgan Stanley MUFG Securities retained its lead in net revenue, JPMorgan gained ground. Foreign banks are also competing to hire talent for securities trading and merger advisory in a sign that competition could only intensify.
Morgan Stanley MUFG Securities, majority-owned by the Wall Street firm, is likely to post a fourth straight year of record net revenue in the current fiscal year, Tamura said. This will build on the previous year’s results of 153.2 billion yen (S$1.3 billion).
The two banks’ partnership dates back to the height of the global financial crisis almost two decades ago. MUFG invested US$9 billion in Morgan Stanley, providing crucial capital at the time. The lenders deepened their ties three years ago with the launch of “Alliance 2.0”, a set of measures that included unifying parts of the brokerages’ Japan stock business.
Morgan Stanley chief executive officer Ted Pick said last year that a potential “3.0” phase is under consideration, while MUFG recently also signalled its intention to work closer together.
“There is a strong view in New York that the Japanese economy will continue to do well,” Tamura said.
In order to be No 1 in the Japanese industry, Mitsubishi UFJ Morgan Stanley Securities needs to do more to strengthen its core business of selling investment products to retail investors at home, according to Bloomberg Intelligence senior analyst Hideyasu Ban.
For instance, the company’s retail client assets under custody stood at 53.5 trillion yen as at September, whereas Nomura had 162.3 trillion yen in wealth management client assets, according to filings.
Tamura said that he’s confident the partnership will eventually reach its goal of being the top player in Japan’s brokerage industry.
“Anything can happen over a decade,” he added. BLOOMBERG
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