23 Sep 2008

Japanese banks move on US banks

4:10 pm on 23 September 2008

Mitsubishi UFJ Financial Group and Nomura are on the move on Wall Street, as Mitsubishi prepares to buy into Morgan Stanley and Nomura moves to buy Lehman's Asia-Pacific business.

Japan's biggest bank, Mitsubishi UFJ Financial Group, is to buy 20% of the ailing giant American bank Morgan Stanley in a deal worth up to $US8.5 billion.

The announcement was made after Morgan Stanley and Goldman Sachs were granted approval by the Federal Reserve to change their status to become a bank holding company, which allows them to enlarge its deposits to raise funds.

The move marks the end of the independent investment bank on Wall Street.

It follows a collapse of confidence in the world's financial institutions, which resulted in the sudden demise of US investment bank Lehman Brothers and forced Merrill Lynch to agree to a takeover by Bank of America.

The changes should enable the companies to raise more funds by opening commercial banks, and will also give them access to a $US1 trillion Federal Reserve rescue package.

A price has not yet been decided. Further details will be revealed after the group has completed due diligence.

Morgan Stanley has been humbled by the credit crisis tearing through the world's financial system.

A tie-up with Mitsubishi UFJ - the world's second-largest bank holding company with $US1.1 trillion in deposits - would allow Morgan Stanley to shore up its capital base.

Lehman deal

Meanwhile, the Japanese investment bank Nomura has confirmed that it will buy the Asia-Pacific business of Lehman Brothers for an undisclosed sum.

The acquisition would allow Nomura to expand quickly outside the country. It is also thought that Nomura wants to buy parts of Lehman's European assets.

In a statement, Nomura said all 3,000 employees of the business throughout the Asia-Pacific region will be kept on.

Lehman filed for bankruptcy protection last week after it was brought to its knees by its huge exposure to risky residential and commercial loans, which have tumbled in value amid the credit crisis.

Lehman's investment banking operation ranks ninth in Asia and accounted for about a fifth of its overall revenue in the first six months of 2008.

Meanwhile, Nomura is also reportedly interested in parts of Lehman's European business, whose headquarters are in London.

Barclays has also been named as a contender after the British bank agreed to pay $US1.75 billion for Lehman's North American investment banking and trading unit last week.