UFJ Holdings Inc. said Wednesday it has filed an appeal against a court order to suspend its merger negotiations with Mitsubishi Tokyo Financial Group Inc., stressing it plans to go ahead with the merger.
The move by UFJ, Japan’s fourth-biggest banking group, came on the heels of a temporary injunction issued Tuesday by the Tokyo District Court, blocking the sale of UFJ’s trust bank unit to MTFG.
The injunction came after Sumitomo Trust & Banking Co. had filed a petition claiming this was a breach of UFJ’s agreement made in May to sell the unit to Sumitomo Trust.
The merger would create the world’s largest banking group, with total assets of 190 trillion yen, topping the 135 trillion yen of Mizuho Financial Group Inc.
UFJ Holdings President Ryosuke Tamakoshi said at a news conference that the cash-strapped firm had no intention of renegotiating with Sumitomo Trust on the sale of its trust banking business.
“Our group is not thinking at present about sitting back down at the table with Sumitomo Trust,” Tamakoshi said.
He also said the MTFG merger talks would have to include the trust bank business, denying speculation that this aspect would be separated.
“We are not considering negotiating (with MTFG) without the trust bank business,” Tamakoshi said.
While obeying the injunction until the next court decision is made, Tamakoshi said UFJ will file a petition to a higher court even if the appeal is rejected at the district court.
He said UFJ has no intention of paying compensation to Sumitomo Trust in a bid to reach a quick settlement.
There is speculation among bank officials and analysts, however, that UFJ could be forced to compensate Sumitomo Trust to settle the dispute before proceeding with the MTFG merger.
Tamakoshi said Tuesday’s court order would influence the basic merger agreement that was scheduled for completion by month’s end. But he declined to elaborate on a new schedule and other details.
UFJ also said the group’s plan to write off heavy bad loans in the first half of this fiscal year remains intact.
“We will dispose of large borrowers’ debts as originally planned,” said Takamune Okihara, president of UFJ Bank.
Large borrowers from the UFJ group include supermarket chain Daiei Inc. and condominium builder Daikyo Inc. Writing off loans to these firms, which are being rehabilitated, is extremely important for UFJ.
At the same news conference, UFJ also admitted that the group had systemically concealed information on the business conditions of its corporate borrowers, correcting its earlier claim that these actions were not intentional.
Earlier this month, the Financial Service Agency reprimanded UFJ.
The watchdog said UFJ had moved important documents to secret rooms and lied that it had not done so; issued false reports on the amount of loans it had extended to small and midsize firms; revised its earnings forecast in a way that did not reflect the actual results, which were much worse; and failed to achieve profit targets by more than 30 percent for two consecutive years, despite the bank’s acceptance of public funds.
“Our group came to understand that (we took) some actions to evade the (FSA’s) inspection,” Okihara said.
The UFJ group had earlier denied that documents were concealed following instructions from some of the bank’s top managers. Having been slapped with business improvement orders from the FSA, however, the banking group asked a team of independent lawyers to examine the matter.
The group announced a range of penalty measures targeting executives, including further dismissals of executives involved in the misconduct and temporary salary cuts for Tamakoshi, Okihara, and Toshihide Mizuno, senior executive officer of UFJ Bank.
UFJ announced on June 18 that the three top executives and eight other senior officials had resigned.
By taking these measures, the banking group hopes to avoid a possible criminal complaint by the FSA.
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