Mitsubishi UFJ Financial Group Inc. (MUFG) is drawing on the expertise of U.S. peer Morgan Stanley to help expand in the wealth management business, the head of the pair’s Japanese joint venture told Reuters.
Japan’s biggest bank is “consulting with Morgan Stanley’s wealth management people about various aspects including product lineup,” Saburo Araki, chief executive officer of Mitsubishi UFJ Morgan Stanley Securities Co Ltd (MUMSS), said in an interview.
MUMSS is a brokerage and investment bank, a product of MUFG’s $9 billion investment into Morgan Stanley at the height of a financial crisis in 2008. The Japanese bank now owns just under a quarter of its Wall Street peer.
Faced with ultrathin profit margins in Japan’s traditional lending business, MUFG has made wealth management a key growth driver, targeting clients with at least 300 million yen (US$2.74 million) in assets.
It aims to increase such assets under management to 16.3 trillion yen in the year through March 2024, from 12 trillion yen in the last financial year.
MUFG hopes to replicate the success of Morgan Stanley which, under CEO James Gorman has turned wealth management into a growth pillar through reducing risk, exiting problematic fields and emphasizing steadier businesses generating reliable revenue. “It helps us greatly that we can use their expertise and experience,” said Araki, CEO of the joint venture since April.
Araki, previously second-in-command at MUFG’s core commercial bank, also said the venture has not yet fully taken advantage of the bank’s vast client base, which includes 1.2 million individuals classed as wealthy.
As such, it will step up efforts to attract commercial bank customers to higher-return products like mutual funds, he said.
MUMSS was created by combining the Japanese investment banking operations of MUFG and Morgan Stanley in 2010. Its immediate parent, Mitsubishi UFJ Securities Holdings Co Ltd, is now Japan’s third-largest brokerage and investment bank in terms of net operating revenue after Nomura Holdings Inc and Daiwa Securities Group Inc.
“We are really happy to have made that investment and to have teamed up with a global investment bank,” Araki said, referring to the $9 billion deal. “The reason we can keep top positions in league tables is none other than Morgan Stanley.”
He said MUFG has no intention of building its own investment banking franchise that would make it unnecessary to rely on Morgan Stanley.
“It’s impossible. We cannot match their global network with investors and issuers,” Araki said.
Asked to describe their respective roles in the venture, he said, “To put it very simply, we provide our client base and they provide solutions.”
The interview took place before the securities watchdog on Friday recommended the Financial Services Agency fine MUMSS around $2 million, citing one instance of a dealer at the brokerage manipulating the bond market.