Mitsubishi UFJ To Buy CBA's Asset Management Unit For A$4B

In an attempt to expand footprint in the global asset management industry, the consolidated subsidiary of Japanese banking behemoth Mitsubishi UFJ Financial Group, Inc. (NYSE:MUFG) — Mitsubishi UFJ Trust and Banking Corporation (“the Trust Bank”) — has signed a conditional Share Sale Deed with Commonwealth Bank of Australia (“CBA”). Under this agreement, the bank will purchase CBA’s global asset management unit for A$4 billion ($2.9 billion).

On closure of the deal, which is expected to be completed in mid-2019, the bank will have assets under management worth $727.2 billion, with A$213 billion adding from CBA across the United States, Australia and Asia.

“It is important to secure a certain size to maintain profitability and competitiveness,” MUFG said in a presentation on the deal. It aims to become “the unparalleled industry leader in Japan, as well as a global player boasting significant presence overseas,’’ the Tokyo-based bank stated.

The current deal comes as Mitsubishi UFJ is seeking to expand its operations in the Asia/Oceania region as the largest asset management firm, catering to client needs with the development of its product lineup. The prevailing weakness in the Japanese loan market, along with compressed margins, has triggered Mitsubishi UFJ’s interest in other Asian markets.

Though the company’s prospects look encouraging, as it focuses on several strategies under its medium-term business plan and global expansion, revenues continue to remain under pressure due to the negative interest rates in Japan. Also, rising costs due to strict regulations in overseas business remains another key concern.

Shares of Mitsubishi UFJ on the NYSE have lost around 18.6%, year to date, compared with the industry’s decline of 16.8%. Currently, Mitsubishi UFJ holds a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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