As Japan prepares to move into the new Reiwa era, when the next Emperor of Japan ascends to the throne, financial services operators are seizing the moment to make a mark and grasp the seismic opportunities the wider Asian region is conjuring up.
Take Tokyo-based MUFG, which is on a mission to bring about its own transformation. While nowhere near the epoch-making scale of naming a new emperor and greeting a fresh dynasty, top-tier changes at MUFG are nonetheless transforming the bank from its traditional Chiyoda-ku-headquartered roots into an outward-looking global financial services group.
Asia ex-Japan is at the heart of MUFG’s new impetus, now viewed as a region that has a key part to play particularly for the bank’s burgeoning global corporate banking business.
Led by Singapore-based Sanjiv Vohra, head of corporate banking for Asia and Oceania, the focus on ASEAN, a region with a young and aspiring population of over 650 million, is beginning to yield results.
Strategic Asean Investments
In recent years the Japanese banking group has shelled out more than US$10 billion to acquire significant stakes in prominent banks in Thailand, Vietnam, Indonesia and the Philippines.
Its holdings include a 20% share in Vietnamese lender VietinBank, a similar holding in Security Bank in the Philippines, a 77.7% stake in Thailand’s fifth-largest bank, the Bank of Ayudhya, commonly referred to as Krungsri, and a 40% interest in Indonesia’s Bank Danamon.
The buying spree is not over yet. Subject to regulatory approvals, MUFG hopes to increase its shareholding in the Indonesian bank in 2019. It is also eyeing bulking up its asset management unit should a suitable target become available.
These calculated moves have given MUFG an enviable platform across Southeast Asia, allowing the bank to offer deep local penetration for global clients via its partnerships, while at the same time act as a conduit for local corporates to pursue international expansion.
Focused Sector Strategy
Beyond the shores of Southeast Asia, MUFG’s Trust Bank spent A$4.1 billion (US$2.95 billion) to snap up Colonial First State Global Asset Management in Australia. The deal, one of the biggest overseas asset management buyouts by a Japanese financial group, is expected to be completed by mid-2019.
Underscoring MUFG’s efforts to acquire sector-specific expertise, last month the Japanese bank announced a 5.6-billion-euro (US$6.34 billion) acquisition of the aviation finance division of German transportation specialist DVB Bank. The deal includes an aviation finance management platform.
By focusing on five sectors, namely healthcare, technology, aviation, project finance and the financial institution business, the bank aims to hone the efficiency of the corporate banking unit.
MUFG’s sector coverage team in Asia covers: consumer, retail, healthcare and industrials; tech, media and telecom; utilities, infrastructure and transportation; real estate; energy and resources. The bank regards these sectors as being critical to the region’s growth.
As the middle class across Southeast Asia grows, Singapore-based Sanjiv Vohra, head of global corporate banking, Asia and Oceania at MUFG, sees a number of trends emerging. In particular, population growth will suck demand for consumer, healthcare, energy and infrastructure provision, sectors which Vohra regards as fundamental in nurturing a successful economic transition.
The bank has of late been hiring to deepen its talent pool in these areas and is expected to make announcements soon on additional senior hires.
Efficiency and cost containment
The appointment this month of Kanetsugu Mike as president and group CEO will maintain the overseas focus of Japan’s largest lender. Mike will continue the course established by his predecessor and now MUFG chairman, Nobuyuki Hirano.
Hirano has been widely credited with growing the Japanese bank and in particular reinforcing MUFG’s relationship with Morgan Stanley following its US$9 billion investment in the US firm in 2008.
Having spent about half of his MUFG career working outside of Japan, Mike understands the benefits of an enhanced global presence.
As the bank’s international exposure increases, Randy Chafetz, deputy chief executive of global corporate and investment banking MUFG, believes one challenge will be critical to get right.
That task facing senior management is to find the balance in implementing the changes while at the same time retaining the important elements and core culture of the organization as it morphs into a global player.
Chafetz points out that currently some 55% of the bank employees are not based in Japan. This balance may shift further as a direct result of the changing demographics in Japan.
MUFG aims to trim the domestic Japanese workforce by around 6,000 by the end of 2023, and also plans to eliminate the workload equivalent of 9,500 employees by automating repetitive duties.