TOKYO: Japanese financial institutions, spared the worst of the subprime crisis, reached out yesterday to take big stakes in US titans crushed by a global credit crunch. Mitsubishi UFJ Financial Group Inc. (MUFG) said it was buying up to 20 percent of ailing Morgan Stanley, while Nomura Holdings bought the entire Asian operations of failed investment firm Lehman Brothers.
Japanese banks have been conservative lenders since suffering their own crisis of bad loans a decade ago, shying away from high-risk subprime assets lent by US banks to high-risk American customers.
MUFG announced it will invest between 400 billion yen and 900 billion yen ($3.75 billion to $8.5 billion) in Morgan Stanley, which said the Japanese bank would eventually take a 20 percent stake. The Tokyo-based bank will also send at least one executive to sit on Morgan Stanley’s executive board, subject to approval by regulatory authorities.
Morgan Stanley, which has more than 50,000 employees worldwide, has been looking for help through a tie-up with another bank as part of a major realignment on Wall Street caused by the subprime crisis.
The MUFG deal was announced hours after Morgan Stanley and Goldman Sachs said they were both agreeing to become holding companies, submitting themselves to more regulation to be part of a massive US government bailout. It marked the end of an era for investment banks on Wall Street. Morgan Stanley was formed in 1935 in the wake of the Great Depression.
Morgan Stanley earlier reportedly was talking with Wachovia Corp. as well as the Chinese sovereign wealth fund China Investment Corporation (CIC).
The US government has put together the $700 billion rescue plan after global tumult following the collapse last week of Lehman Brothers, a Wall Street institution with a 150-year history.
Nomura Holdings said it was buying Lehman Brothers’ Asian operations and would offer jobs to all 3,000 employees. Nomura reportedly beat bids from Britain’s Barclays PLC — which bought Lehman’s US operations including its Manhattan skyscraper — and Standard Chartered PLC.
The Wall Street Journal Asia reported that Nomura was paying $225 million for Lehman’s equities and investment banking operations across Asia, including Japan and Australia. “Japanese financial institutions are less affected by the impact of the subprime crisis, while they are relatively cash-rich, compared with its rivals overseas,” said Masatoshi Sato, a strategist at Mizuho Investors Securities.
“In that context, it is a realistic scenario that Japanese companies like Nomura will take a chance to seek shares and operations of troubled rivals in a bid to swiftly expand operations overseas,” Sato said.
Kenichi Watanabe, president of Nomura Holdings, hinted at buying a stake in Lehman Brothers days before the US investment bank collapsed.
“Our ability to capitalize on this opportunity in spite of such volatile markets reflects our financial strength and demonstrates how well we have managed the credit crisis,” Watanabe said in announcing the Lehman deal.
Nomura scaled back its overseas operations following the burst of Japan’s “bubble” speculative economy in the early 1990s, but has now shown interest in expanding operations in Asia.
Japan’s Jiji Press also reported that Nomura had proposed to buy both the Asian and European units of Lehman.
Nomura Holdings shares soared 9.58 percent yesterday, outperforming the headline Nikkei index of the Tokyo Stock Exchange, which gained 1.42 percent.
