JAPAN’S largest lender, Mitsubishi UFJ Financial Group (MUFG), is preparing to cut half its Asian investment banking workforce outside its home country as it struggles with dwindling profits and a falling share price.
Top executives in Tokyo have decided to make redundant as many as 90 of the 180 MUFG Securities staff in Hong Kong and Singapore, with employees to be notified next month, according to people familiar with the decision.
All investment banking divisions will be affected, with trading operations to be closed almost entirely and sales and back-office staff heavily cut and their responsibilities transferred to London, the people said. The Asian debt capital markets team will lose a few members, but will remain largely intact. Cuts to MUFG’s 2,000-strong banking and brokerage operation in London are also being discussed, but the scale has not been finalised.
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In June, 500 directors and managing directors were offered voluntary redundancy, with the intention of ultimately losing about 50 to cut costs. Big drops in profit at the bank’s international trading businesses amid volatile markets and slowing growth in Europe and China prompted the top-level debate about MUFG’s staff numbers, the people said.
MUFG’s shares have fallen 20 per cent in the past year, largely on dwindling hopes of an upturn in Japan’s banking industry, which is under pressure from ultra-low interest rates and demographic changes that are shrinking customer numbers.
The stock trades at just over 0.4 times its book value and the bank made a 6.5 per cent return on equity last year, versus a 10 per cent target. “We constantly review our business in all markets in which we have a presence to ensure we remain competitive and relevant to clients,” the bank said.
“And as a general point, we don’t comment on speculation or rumour.”
Net operating profit in the global markets division plunged 26 per cent to 251 billion yen (S$3.19 billion) last year, largely because of a big fall in Europe, and the bank said it “struggled in customer business due to sluggish markets.”
A number of Japanese banks have been shrinking their overseas operations. Earlier this year, Nomura cut 50 employees from its global trading division – with the axe falling heaviest in Europe – after a difficult year in volatile markets.
Still, MUFG is expanding in some other countries and products to offset its problems in Japan, completing a US$6.3 billion acquisition of the aviation finance business of Germany’s DZ Bank in March.
The deal was the latest in what is now a multiyear worldwide expansion by MUFG and its two main Japanese rivals, Mizuho Financial Group and Sumitomo Mitsui Financial Group.
All three, facing the same headwinds of ultra-low interest rates at home and a permanently shrinking domestic market, have sought out new growth markets overseas. FT