Tokyo/Hong Kong: Mitsubishi UFJ Financial Group (MUFG) has acquired a US commercial property loan portfolio from a Deutsche Bank unit worth $3.7 billion (Dh13.59 billion) as cashed-up Japanese lenders swoop in on assets sold by retreating European banks.
The deal, which comes as MUFG is pushing aggressively to ramp up its United States presence, will make the Japanese bank the ninth biggest commercial real estate lender in the US, up from 17th, while diversifying its property portfolio and allowing it to deploy excess capital.
It also comes as a number of European banks offload loan portfolios and exit non-core operations, helping them to raise capital to meet tough new regulatory norms under Basel III requirements.
The all-cash acquisition is expected to close in the second quarter of this year and does not require any regulatory approval, MUFG said in a presentation. It did not disclose the amount to be paid in the transaction.
The bank also noted that US commercial property prices have recently recovered from 2009 lows.
About 52 per cent of loans are made to properties in the top three US metropolitans areas: New York City, Los Angeles and Chicago.
MUFG president Nobuyuki Hirano has said the bank wants to double the size of its unit Union Bank, which would make it the 10th largest lender the US. The San Francisco-based bank bought Pacific Capital Bancorp for about $1.5 billion last year.
Relatively unscathed by Europe’s debt problems and boasting stronger capital and liquidity positions than their global peers, MUFG and domestic rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group have been actively scouting for distressed assets as they confront slowing loan demand at home.
Overseas purchases have pushed up the foreign share of total outstanding loans for the three megabanks to 20 per cent at end-September 2012, compared with 16 per cent at the end of March 2010, according to Moody’s Investors Service.
In 2010, MUFG acquired a $6.4 billion project financing loan book from Royal Bank of Scotland. More recently, Mizuho agreed to buy a Brazilian unit of Germany’s WestLB for about $380 million.
But Moody’s Investors Service senior analyst Tetsuya Yamamoto said he expected the pace of overseas purchases by Japan’s top three banks to slow as their foreign currency funding is not that strong compared with their Japanese yen liquidity.
While they have been looking at buying minority equity stakes in some Asian banks, that would be a drain on core capital.
“From a regulatory capital perspective, acquisition of loans would make more sense than a minority stake in a foreign bank,” Yamamoto said.
