Japan’s MUFG to exit US retail banking in $ 8 billion deal with US Bancorp


MUFG Bank signs can be seen in Tokyo, Japan on April 3, 2018. REUTERS / Toru Hanai / Files

  • MUFG sells MUB to US Bancorp for $ 8 billion
  • The deal includes $ 5.5 billion in cash, $ 2.5 billion in shares
  • MUFG will hold 2.9% of Bancorp’s capital

TOKYO, Sept.21 (Reuters) – Mitsubishi UFJ Financial Group (MUFG) (8306.T) is pulling out of US retail banking with the $ 8 billion sale of MUFG Union Bank (MUB) to US Bancorp ( USB.N) as a digital technology and industry consolidation is crowding out smaller lenders.

The deal includes $ 5.5 billion in cash and $ 2.5 billion in shares that will give Japan’s largest lender a 2.9 percent stake in Minneapolis-based US Bancorp, the fifth largest bank in the United States, the banks announced on Tuesday.

As a result of the deal, which it plans to conclude by the end of June next year, MUFG will focus on corporate and investment banking in the United States through other units and in through its partnership with Morgan Stanley (MS.N), which is a fifth company owned by the Japanese bank.

“We cannot be successful without a certain scale of activity,” Morito Emi, general manager of corporate planning at the Japanese bank, said at a press briefing. “There are a lot of mergers and acquisitions going on there,” he added.

To compete, MUB, which has around 300 branches mostly on the west coast of the United States, would have had to invest heavily in new digital technologies to keep pace with its biggest rivals offering new online banking services, Emi said.

The pandemic has further accentuated long-standing trends facing U.S. banks. Historically low interest rates have made profits difficult, and foreclosure measures to contain the virus have made consumers more comfortable using digital channels, forcing them to spend more on technology.

Consolidation has been one way to meet these challenges, with transactions reaching $ 55 billion last year, the highest in more than a decade.

Much of the activity has been focused on mid-sized and larger regional lenders, who are trying to keep pace with the Big Four National Banks. The combination that created Truist Financial Corp , completed in December 2019, launched a mini wave that saw banks including PNC Financial Services and Citizens Financial Group announce transactions. Read more

STRATEGY

For US Bancorp, the MUB deal strengthens its presence in California to become the fifth largest deposit holder in the most populous US state, according to a statement.

The acquisition is made at 1.3 times the tangible book value of MUB, a common metric used to judge bank mergers, while US Bancorp said it would reap $ 900 million in cost savings through the systems integration and combination of real estate footprints.

MUB’s exit is the latest departure from US retail banking by non-US lenders, which have struggled to compete with their domestic rivals. Spain’s BBVA (BBVA.MC) completed the transfer of its operations to PNC in June, and HSBC (HSBA.L) agreed in May to sell or close its branches. Read more

MUFG’s push into the US banking sector was part of a strategy to expand overseas business to increase profits, as ultra-low interest rates and shrinking population in Japan made it difficult to earn money in the country.

The deal with US Bancorp comes as MUFG focuses more on other parts of Asia.

Mitsubishi UFJ in 2008 paid around $ 3.5 billion for the third of Mitsubishi Union Bank that it did not already control. With assets of $ 132 billion, it provides banking services to businesses, businesses and individuals as well as wealth management.

In addition to US Bancorp’s $ 8 billion in cash and shares, the Japanese parent company will also get around $ 9.6 billion in dividends or share buybacks at MUB, bringing the total deal value to 17. , $ 6 billion.

Part of MUB’s administrative functions and its merchant and investment banking departments will be transferred to other parts of MUFG’s US operations.

($ 1 = 109.5700 yen)

Reporting by Tim Kelly, Chang-Ran Kim, Ritsuko Ando and Elaine Lies in Tokyo and David French in New York; Editing by Pravin Char, Mark Potter and Andrea Ricci

Our standards: Thomson Reuters Trust Principles.


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