Mitsubishi may seek Morgan assets

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market capitalization, is in talks to buy Morgan Stanley’s trust-banking assets, said two people with knowledge of the matter.

The assets are valued at about US$4-billion, according to the people, who asked not to be identified while talks continue. UnionBanCal Corp., the Japanese bank’s San Francisco-based unit, plans to acquire the business, the people said. Nikkei newspaper, which reported the negotiations, said the deal would need approval from the U.S.

The potential purchase by Morgan Stanley’s largest shareholder underscores Japanese banks’ interest in acquiring assets to expand as demographic changes, including a shrinking and aging population, slow lending demand at home. Also through UnionBanCal, Mitsubishi UFJ this month agreed to pay US$3.7-billion for U.S. property lending assets from Deutsche Bank AG.

“They have made a point of cementing their footprint in the United States,” Christopher Wheeler, a banking analyst with Mediobanca Spa in London, said of Mitsubishi UFJ. “We are going back to where we were in the eighties, with Japanese banks buying up U.S. banking assets, particularly in California.”

Mika Watanabe, a Morgan Stanley spokeswoman in Tokyo, and yuji Okumura, a spokesman for Mitsubishi UFJ in the city, both declined to comment. The Japanese bank owns a 22% stake in Morgan Stanley, according to data compiled by Bloomberg.

Shares of Mitsubishi UFJ have gained about 85% since mid-November, when an election campaign began that ushered Prime Minister Shinzo Abe into office on a pledge to stoke inflation. The benchmark Nikkei 225 stock average has advanced 57% in that period.

Mitsubishi UFJ has stepped up acquisitions in the U.S., buying UnionBanCal in 2008 and Santa Barbara-based Pacific Capital Bancorp last year as persistent deflation inhibits loan demand at home. The purchase of U.S. real estate loan assets from Deutsche Bank AG will boost its commercial lending business, mainly on the east coast.

Other acquisitions in recent years include its purchase of Bank of America Corp.’s stake in their private banking venture in Japan in December. Mitsubishi UFJ’s trust banking unit also agreed to buy a 15% stake in AMP Ltd.’s Australian as setmanagement business in December 2011, after purchasing project financing assets from royal Bank of Scotland Group PLC a month earlier.

The Japanese bank has been deepening its ties with Morgan Stanley since acquiring a stake in the New york-based bank by investing US$9-billion in October 2008 as the U.S. firm’s stock price collapsed in the wake of Lehman Brothers Holdings Inc.’s bankruptcy.

The firms in 2010 set up two Japan investment banking ventures.