MUFG puts ‘boots on ground’ in Canada capital markets bid

Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. looking overseas for revenue and growth opportunities as negative interest rates have crimped domestic markets.

The Tokyo-based financial firm, which has been in Canada for 63 years, accelerated its push into capital markets after receiving a domestic securities licence last year.

MUFG has since landed some high-profile deals, including co-leading acquisition financing for Alimentation Couche-Tard Inc. and Canadian Natural Resources and then, further on, full capabilities around FX and ideally derivatives.”

The bank plans to hire a chief executive officer for the Canadian securities business along with “a handful” of salesmen and traders, as well as support staff, said Gardner, who joined MUFG in 2015 after almost two decades at Royal Bank of Canada.

He now oversees an operation with 145 employees in Toronto, Montreal, Calgary and Vancouver.

MUFG is undertaking the expansion to complement any institution, were looking for return on those investments and obviously a return on the strategy.”

Beyond the large investment-grade firms that MUFG has traditionally focused on, Gardner said he sees growth potential in going after mid-sized Canadian companies with lower credit ratings.

“The sweet spot is the higher end of the mid-corporate space, but in verticals that we know: power and utilities, resources, diversifieds and particularly things like retail and other areas, like transportation,” Gardner said.

Canadian capital markets are dominated by the nation’s six largest lenders, which crowd out foreign investment banks when it comes to arranging stock sales, bond issues and syndicated loans.

MUFG ranks eighth so far this year as lead arranger on company loans with a 4 per cent market share after lending $4.1 billion on 10 deals, according to data compiled by Bloomberg.

It ranked 11th in 2016 with $4.4 billion of loans from 13 deals.

Gardner said he’s realistic about making inroads against large domestic competitors.

“The Canadian bank market is still a clubby market,” he said. “It is hard to crack.”