Orix Capital Trading: Indonesia prime target for MUFG in bank's quest to become global player

SHIBUYA-KU, Japan - April 20, 2016 - PRLog -- One of Japan's largest companies is pursuing an aggressive mergers and acquisitions strategy elsewhere in the Asia-Pacific region as well as North America, according to analysis by Steve Rogers, Director of Asset Allocation at Orix Capital Trading who overseas clients funds totalling 3bn.

He pointed to a recent interview given by the head of the core unit of Mitsubishi UFJ Financial Group (MUFG), the largest bank in Japan, which repeatedly referred to its international ambitions. Takashi Oyamada, the recently appointed president of Bank of Tokyo-Mitsubishi UFJ (BTMU), said that the company considered the centres of its operations to be the United States as well as Asia.

Although Mr. Oyamada would not put a figure on the funds that the bank was considering expending on acquisitions, he did refer to his business as "a global commercial bank, as well as making it clear that it was investigating suitable targets in Indonesia.

Mr. Oyamada, aged 60, is one of the ultimate insiders in Japan's banking world, seen as a respected veteran of the industry. Mr. Rogers pointed out that many in the sector are expecting him to become the overall president of MUFG in the future, probably after a spell at the top of BTMU, as the natural heir to Nobuyuki Hirano.

According to Steve Rogers, the bank's focus on Indonesia was unsurprising given that country's young population and strong potential for economic growth in the near future. He picked out several potential acquisitions, in particular the 39% stake that Australia and New Zealand Banking Group Ltd holds in PT Bank Pan Indonesia Tbk.

Orix analysts have been closely following the Indonesian market for some time, recognizing its potential for multinationals hungry for new assets. A stake in Bank Danamon, of Indonesia, was also likely to be under consideration, added Mr. Rogers, given that Temasek Holdings, owned by the state of Singapore, had already attempted to divest itself of its share.

The financial crisis that shook the world in 2008 had left MUFG, which suffered relatively little damage, in a strong position, he suggested. The bank had spent several years acquiring new assets overseas, with an increase of around 40% in this activity in the last five years leaving them standing at almost 300 trillion yen (nearly $2.7 trillion).

Steve Rogers cautioned that European banks were likely to be seen as less attractive targets for the bank, especially in the wake of Mr. Oyamada's interview, conducted just a few days after taking up his new role at the start of April. Indeed, Mr. Oyamada had specifically ruled out the prospect.

He pointed to a number of major deals that MUFG had struck in the recent past, such as its acquisition in 2013 of a controlling stake in Bank of Ayudhya Pc1 in Thailand, a deal worth in excess of $5 billion. Just a few days ago, it completed a 20% share in Security Bank Corp of the Philippines for $790 million. Its largest deal in the US remains the purchase of a 20% stake in Morgan Stanley, which cost the bank $9 billion during the most volatile period of the 2008 financial crisis.

Mr. Oyamada was in a difficult position, opined Mr. Rogers, because making retail depositors take on the cost of negative interest rates risked a consumer backlash. Excess reserves held at the Bank of Japan now attract charges, making fast-growing deposit volume expensive. He suggested that promoting fee-generating services might be a solution for accounts with large corporate clients.

In Steve Rogers' view, Mr. Oyamada faces a tough environment in which these negative interest rates are hurting profits. Keeping the commercial banking business on an even keel would become even harder if the BOJ began to charge deposit fees, although this was not likely in the near term.

About Orix Capital Trading:

Established since 2012 to provide preferred, corporate and institutional investors access to the ever growing east-west opportunities. Privately held and independent, fee only full service providers beholden only to their clients.

Headquarters in Tokyo, Japan at the gateway to the Greater China region with assets under management in excess of $4.75bn

http://orixcapitaltrading.blogspot.com/