Mitsubishi UFJ Financial Group Inc. is considering raising up to ¥1 trillion in new capital by the end of March to shore up its capital base amid sharp falls in its stockholdings amid the global financial upheaval, sources said Sunday.
MUFG is planning to raise fresh funds by issuing preferred and common shares, the sources said, adding it will finalize the specific amount to be raised and the timing after studying stock market movements and other factors.
In the face of recent plunges in global stock markets, Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are also contemplating large-scale capital increases, the sources said.
With MUFG’s move, all three of Japan’s biggest banking groups are poised to reinforce their capital bases to keep their capital adequacy ratios from falling, observers said.
MUFG’s plan to boost its capital base comes after it announced earlier this month that it had bought a 21 percent stake on a fully diluted basis in troubled U.S. investment bank Morgan Stanley for $9 billion after making revisions to the terms of the acquisition.
The megabank has made a handsome amount of investments since August to turn its California-based subsidiary UnionBanCal Corp. into a wholly owned unit and consumer loan lender Acom Co. into a subsidiary.
The envisioned capital increase is partly aimed at supplementing recent huge investments of well more than ¥1 trillion, the sources said.
The plan also comes at a time when MUFG is considering lowering its midterm consolidated net profit projection due to rising costs associated with the disposal of bad loans and the dwindling value of its shareholdings.
As of August, MUFG was forecasting a group net profit of ¥270 billion for the April-September period, but it is expected to slash the figure to less than ¥200 billion, according to informed sources.
The banking group will also likely cut its estimate for group net profit for the entire 2008 business year from an earlier forecast of ¥640 billion, they said.