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Mitsubishi UFJ Financial to raise $10.6 billion

Mitsubishi UFJ Financial to raise $10.6 billion

Mitsubishi UFJ Financial Group Inc. said Monday it will raise up to 990 billion yen ($10.6 billion) by issuing new shares over the next year, shoring up its balance sheet in the wake of a massive investment in Morgan Stanley.
The Japanese banking giant said it will issue up to 600 billion yen ($6.5 billion) in common shares in the one-year period from Nov. 4. It will also issue 390 billion yen ($4.2 billion) in a private allocation of preferred shares to take place in November.
Mitsubishi UFJ announced the capital raising two weeks after completing its $9 billion purchase of a 21 percent stake in Morgan Stanley. It was a life-saving deal for the Wall Street icon which had teetered on the brink of collapse as its market value plummeted.
Many Japanese banks had solid finances compared to overseas rivals as the current financial crisis unfolded, and moved to take advantage with cheap purchases abroad. But the spending spree is now forcing such banks to recapitalize, particularly as the fallout from Wall Street's meltdown begins to pressure them in their home market.
"With strategic investments domestically and abroad, as well as reinforcing the overall strength of the group through reorganization, we have put the pieces in place for future growth," Mitsubishi UFJ said in a statement.
Ratings agency Standard & Poor's said Mitsubishi UFJ's share issue won't result in a higher credit rating as the capital increase only serves to offset the capital decrease involved in buying the Morgan Stanley stake. Mitsubishi UFJ used cash to finance the investment in Morgan Stanley.
S&P also warned that the recent slowdown of Japan's economy and falling stock prices are increasing pressure on Mitsubishi UFJ's asset quality.
"Furthermore, the company's profitability is also being pressured by reduced demand among borrowers and a decrease in fee income, mainly from sales of investment trusts," it said in a statement.
The Mitsubishi UFJ announcement came after the stock market closed Monday, but Japanese media had widely reported that it and other banks were planning to issue new shares to boost reserves after splashing out on acquisitions abroad. Nomura Holdings bought the Asian and European divisions of failed US investment bank Lehman Brothers.
The reports sent bank shares down sharply during trade Monday as investors sold on dilution fears. Mitsubishi UFJ shares plummeted 14.6 percent to 583 yen and Nomura fell 14.3 percent to 904 yen.
The benchmark Nikkei 225 index shed 486.18 points, or 6.4 percent, to 7,162.90 _ the worst closing level since October 1982.


Updated : 2021-05-11 15:53 GMT+08:00