February 24, 2017 2:30 am JST

Mitsubishi UFJ expands in US with online banking

Japan's leading bank group seeks nationwide presence

TOKYO -- Japan's Mitsubishi UFJ Financial Group will move into online retail banking in the U.S., where it seeks to build its foothold into a base for challenging local and European rivals.

The new online bank, PurePoint Financial, will begin offering its services this spring. Touting one of the highest savings interest rates, it seeks to reach several billion dollars in deposits over the next few years. Plans call for establishing 20 or more physical PurePoint locations, whose main purpose will be to provide customer support for the online services, in places like Chicago and New York, where the Japanese group does not yet have retail banking branches.

PurePoint will piggyback onto the banking license of Union Bank, the California-based lender that MUFG acquired in 2008. Union Bank's retail network remains confined mainly to the West Coast.

During the late 1980s, Japanese banks expanded their presence in the U.S. -- a notable deal was Mizuho Financial Group predecessor Dai-Ichi Kangyo's acquisition of CIT -- but mostly in corporate finance. Now, they are trying to become part of the retail banking landscape.

The negative interest rate imposed by Japan's central bank has further squeezed profit margins on domestic lending, adding to Japanese banks' enthusiasm for overseas expansion. North American lending by Japan's three megabanks -- MUFG, Sumitomo Mitsui Financial Group and Mizuho -- grew by half over three years to $176.5 billion at the end of March 2016.

Lacking the local presence needed to take in deposits to lend out for profit, the trio has paid a premium in relying on wholesale funding. MUFG reckons that with online banking catching on in the U.S., it needs only a minimal number of branches to amass a sufficient level of customer deposits.

With President Donald Trump promising to rev up the American economy with infrastructure spending and other moves, corporate financing demand is expected to continue to rise. Access to dollar deposits has become a major challenge in MUFG's U.S. strategy.

The U.S. already ranks as one of MUFG's most valuable markets, accounting for about half of the 1.3 trillion yen ($11.5 billion) in gross profit generated by the group's overseas operations in the year to last March. Earnings on MUFG's one-fifth stake in Morgan Stanley added to the bottom line. Slightly more than 140 billion yen of last fiscal year's roughly 950 billion yen group net profit was thanks to the Wall Street bank.

Although uncertainty over the Trump administration's polices in other areas, notably trade, give reason for pause, MUFG has decided to double down on the U.S. Rival Japanese megabanks are making their own moves. Sumitomo Mitsui said in December it had agreed to buy American Railcar Leasing, enlarging its U.S. presence in this business. In 2015, Mizuho acquired a portfolio of North America loan commitments from Royal Bank of Scotland Group.

(Nikkei)

Mitsubishi UFJ Financial Group, Inc.

Japan

Market(Ticker): TKS(8306)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 92,229.4M
Shares: 14,168.9M

Mizuho Financial Group, Inc.

Japan

Market(Ticker): TKS(8411)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 45,500.9M
Shares: 25,389.6M

Sumitomo Mitsui Financial Group, Inc.

Japan

Market(Ticker): TKS(8316)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 54,166.7M
Shares: 1,414.06M

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