MUFG Bank seeks more acquisitions after 396 billion rupee India deal

[TOKYO] MUFG Bank is looking for opportunities to make further acquisitions or investments in Asia and elsewhere, according to the new head of the lending unit at Japan’s largest banking group.

Non-bank financial companies are potential targets, banking unit CEO Masakazu Osawa said, not ruling out further forays even as MUFG completes its acquisition of a 20 per cent stake in an Indian consumer lender. The firm sealed the 396.2 billion rupee (S$5.4 billion) deal with Shriram Finance earlier this month, touted as the largest cross-border investment in India’s financial services sector.

Osawa, 57, took the reins at the core unit of Mitsubishi UFJ Financial Group this month, replacing Junichi Hanzawa, who was promoted to CEO. Over the past 10 years, the Tokyo-based company has made cross-border acquisitions and investments worth more than US$17 billion as it sought to expand in faster-growing markets abroad, data compiled by Bloomberg show.

Japanese banks have been reaping record profits as rising domestic interest rates bolster lending income. MUFG is expecting net income of 2.1 trillion yen (S$18 billion) for the year that ended in March, almost double the amount it earned just three years ago.

Investors are waiting to gauge how cautious the banks are about the outlook for the new fiscal year when they give earnings guidance next month. While Osawa said that the impact of the Middle East conflict is likely to be bigger in Asia than the US and Europe, he was not overly pessimistic about the Japanese economy.

“Loan demand has been very strong for the past year. Companies have been increasing capital expenditure and acquisitions,” he said.

“How things unfold from here will depend somewhat on the immediate situation, but fundamentally, I believe there is underlying strength,” he said, noting that corporate clients are likely to keep taking steps to improve value following pressure from activist shareholders.

Still, Osawa and other bank chiefs have a growing list of concerns, including the fallout from the Iran conflict and signs of stress in private markets. Osawa said that MUFG’s lending to non-bank financial institutions, which include private credit funds, is limited. “We are not expecting any meaningful losses from our exposure,” he said.

Policymakers and industry officials are also rushing to respond to evolving cybersecurity threats, such as those potentially posed by Anthropic PBC’s latest artificial intelligence model, known as Mythos.

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While Osawa said that he needs more information about Mythos, he is confident in the bank’s defences. “Cybersecurity has been one of the biggest risks and we have been allocating significant resources to it in recent years.”

Osawa said having better cybersecurity systems can give MUFG an edge in attracting and retaining customers as local banks gear up to compete for retail savings. Deposits are gaining appeal as a cheap funding source in Japan, now that interest rates have resumed rising after years of deflation.

MUFG is planning to launch a digital bank later this fiscal year, offering cheaper transaction fees and smoother connections for stock trades and other financial services.

“In the end, it’s about whether customers choose MUFG to trust a large chunk of their money,” Osawa said. BLOOMBERG