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Mitsubishi UFJ Plans to Invest in Global Asset Managers

Zacks Equity Research

Mitsubishi UFJ Financial Group MUFG is mulling to continue acquiring asset managers to combat slowdown in the domestic lending business. The news was reported by Bloomberg.

In October 2018, the company agreed to acquire Commonwealth Bank of Australia’s asset management unit, Colonial First State Group Limited Subsidiaries. With this buyout, Mitsubishi will be able to offer products across equities, alternatives and fixed income. It will also have specialist capabilities in Asian and emerging markets, and in passive products.

Japan’s largest lender also plans to purchase profitable asset finance portfolios, such as DVB’s aviation finance unit, which it agreed to buy in March 2019.

These strategies are part of Mitsubishi’s three-year business plan (ended March 2021). Under this, the lender seeks to expand in areas such as leveraged, acquisition and aviation finance while disposing of low-return assets, and thus bolster profitability of its lending portfolio.

The article reported that Mitsubishi plans to strengthen compliance team in order to match global regulatory requirements. Also, it acknowledges that improving compliance would be costly and so expects regulatory expenses to reach ¥35 billion by March 2021.

Mitsubishi focus on building its global presence through these strategic efforts seems impressive. Notably, its strong capital position supports such expansion strategies. However, net interest income remains under pressure due to low domestic interest rates.

The stock has lost 18.6% over the past six months against industry’s growth of 1%.

Mitsubishi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space are Itau Unibanco Holding S.A. ITUB, Bank of Montreal BMO and Banco Santander Brasil SA BSBR. All these stocks carry a Zacks Rank #2 (Buy).

Itau Unibanco’s Zacks Consensus Estimate for current-year earnings has been revised 2.6% upward for 2019 in the past 60 days. Also, its share price has increased 11.1% in the past two years.

Bank of Montreal’s current-year earnings estimates have been revised 1.4% upward over the past 60 days. Further, the company’s shares have jumped 2.4% in the past 24 months.

Banco Santander Brasil’s consensus estimate for current-year earnings has been revised 2.2% upward over the past 60 days. Moreover, in the past two years, its shares have gained 51.3%.

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