Business / Corporate

Mitsubishi UFJ eyeing BNY Mellon trust arm

Bloomberg

Mitsubishi UFJ Financial Group Inc. is considering a bid for Bank of New York Mellon Corp.’s corporate trust arm, sources with knowledge of the matter said.

The sources, who asked not to be identified as the deliberations are private, didn’t say how much Mitsubishi UFJ may offer. BNY Mellon, the world’s largest custody bank, is working with Goldman Sachs Group Inc. to find buyers for the unit, which could fetch at least $2.5 billion, a source said last month.

Low interest rates and a shrinking population at home are prompting Japan’s biggest banks to expand abroad. Mitsubishi UFJ, which owns about 22 percent of Morgan Stanley and runs San Francisco-based UnionBanCal Corp., is looking to invest in the United States and Asia, Deputy President Masaaki Tanaka said in February.

“There’s an advantage of scale in the trust-banking business,” said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc. “If this deal is realized, MUFG would be able to cut costs in their global trust-banking operations and increase profitability.”

BNY Mellon’s corporate trust arm helps companies process payments on debt they issue, and works with investors to recover their money if companies default. With 3,500 employees at 61 offices around the world, the unit services about $12 trillion in outstanding debt for its clients, according to New York-based BNY Mellon’s website.

The business has become less lucrative after the credit crisis made it more difficult to package and sell the loans. BNY Mellon Chief Executive Officer Gerald Hassell is selling assets and paring costs to boost profitability.

Kazunobu Takahara, a Tokyo-based spokesman for Mitsubishi UFJ, declined to comment.

Mitsubishi UFJ will integrate its U.S. operations under a holding company on July 1, it said in a statement in February. It invested $9 billion in Morgan Stanley in 2008 during the global financial crisis, and spent about $3.5 billion to make regional lender UnionBanCal a wholly owned subsidiary, to strengthen its foothold in the world’s largest economy.