Mitsubishi UFJ May Buy Additional U.S. Banking Assets

July 21 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc., the Japanese lender that bought UnionBanCal Corp., said it may spend more than 500 billion yen ($5.7 billion) to acquire more U.S. banks as domestic loan demand falls.

Japan’s largest bank by market value is examining about 7 lenders of similar size to UnionBanCal, said Tatsuo Tanaka, head of global banking. The Tokyo-based bank aims to boost overseas profit by more than 40 percent to 1 trillion yen, he said.

The bank, which invested $9 billion in Morgan Stanley in 2008, is looking abroad as the world’s second-largest economy slows and the nation’s population declines. Mitsubishi UFJ spent about $3.6 billion the same year to take full control of San Francisco-based UnionBanCal.

“We want to be one of the top ten banks in the U.S. in terms of assets and profit,” Tanaka, 63, said in an interview in Tokyo yesterday. “I’d like to do a large investment in the U.S.” He didn’t provide a timeline for the revenue target or acquisitions.

Tanaka will become chairman of UnionBanCal on July 28. The lender reported net income of $77 million in the three months ended March 31, after a loss of $65 million in the previous year as bad-loan provisions doubled. The unit acquired Washington- based Frontier Bank and California’s Tamalpais Bank in agreements with the Federal Deposit Insurance Corp. in April.

Japan’s economy will expand 2.5 percent this year, compared with 8.7 percent for developing nations in east Asia, the World Bank forecast last month. Lending by Japan’s banks fell by 2.1 percent in June from a year earlier, the seventh straight month of declines.

Coast to Coast

Mitsubishi MUFJ fell 0.3 percent to 400 yen as of 9:08 a.m. in Tokyo Stock Exchange trading. The stock has dropped 11 percent this year.

Mitsubishi UFJ will “actively consider quality investment opportunities” in the U.S. market, the bank said in presentation material dated May 21. Tanaka said yesterday these may be on the east and west coasts, without naming any targets.

Rival Sumitomo Mitsui Financial Group Inc., Japan’s third- largest publicly traded bank by assets, may spend as much as $5 billion to buy a stake in a U.S. bank in the next three years, Hiroshi Minoura, head of international banking at Sumitomo Mitsui Banking Corp., said earlier this month.

Mitsubishi UFJ received 78.2 billion yen in dividend income from its investment in Morgan Stanley in the fiscal year ended March 31, according to regulatory filings. It still owns $8.4 billion of Morgan Stanley preference shares, which pay an annual dividend of 10 percent, according to the bank’s financial disclosures.

Mitsubishi UFJ returned to profit in the fiscal year ended March 31 and said it expects profit to rise 2.9 percent to 400 billion yen this year. That would still be less than half what the bank earned in the 12 months through March 2007.

The bank raised 1.03 trillion yen in a share sale in December, raising the bank’s Tier 1 Capital Ratio, an indicator of a lender’s ability to absorb losses, to 10.6 percent.