Asiamoney best bank awards 2018: Japan
Best domestic bank: MUFG
Nobuyuki Hirano’s MUFG is a powerhouse, achieving superlative after superlative: Japan’s biggest bank; its second-largest company (after Toyota); the world’s leading provider of project finance; etcetera etcetera. The list goes on and on.
Having become Japan’s first bank among the country’s rather staid big three – ahead of Mizuho and SMBC – by some distance, MUFG is now making even greater strides internationally.
It has sprinted past HSBC to become the world’s fifth-biggest bank in terms of assets – and the world’s biggest non-Chinese bank – and MUFG wants its four initials to be as recognizable in international markets and high streets as, well, HSBC.
The home market is humming if not roaring, so this firm has extended its global reach this year to become the Japanese bank with the biggest international footprint, boasting more than 2,000 offices in 50-plus countries. That all helped MUFG deliver profits for the six months to September 30 of ¥650.7 billion ($5.8 billion), up almost 4% on the same period in 2017.
Group assets are now tallied at $2.7 trillion.
As Hirano sallied abroad, he also kept a tight grip on MUFG at home. Although overheads inevitably rose because of MUFG’s aggressive overseas expansion, both from their acquisition costs and by bringing these new purchases into line with international compliance regimes, the impact was offset by keeping domestic costs in line.
MUFG’s non-Japanese offshoots now contribute roughly 40% of net operating income, and 40% of the group’s employees are non-Japanese working in international group offices.
As if to underline that HSBC is in Hirano’s sights, more than 40% of MUFG’s overseas operating profit was generated in Asia, the focus of MUFG’s push offshore and where HSBC is most active.
Best corporate and investment bank: MUFG + Morgan Stanley
Best international bank: Morgan Stanley
From muck comes brass, as the saying goes, and the MUFG-Morgan Stanley joint venture in Japan proves that axiom better than most.
Flashback to the Lehman Brothers-derived chaos of a decade ago and Morgan Stanley was on its knees, with US banks collapsing around it. MUFG stepped up with a $9 billion bailout; 10 years on, that looks like chump change for the Japanese. That stake has since tripled in value, Morgan Stanley today makes up around 20% of MUFG’s profits and the duo’s clever joint venture in Tokyo repeatedly tops Japan’s investment banking league tables. And 2018 has been no exception.
Such is the tightness, indeed the effectiveness, of how MUFG and MS work together in Japan, we’ve thought it best to take these two awards together. Examine any big deal in Japan over 2018 and there would be a good chance someone from MUFG-Morgan Stanley was sitting alongside.
The duo’s deal roster this year reads pretty much like Japan’s: the sale in May of Anglo-Irish biopharma group Shire PLC to Takeda Pharmaceutical for $81.5 billion, the third-largest takeover ever in Britain and Japan Inc’s largest-ever acquisition; the $60 billion merger of SoftBank’s US telco Sprint with Deutsche Telekom’s T-Mobile; Bain Capital and SK Hynix’s $18 billion purchase of Toshiba Memory in June; the $13 billion integration of Chubu Electric and Tepco’s energy businesses into Jera in February; Sony’s $3.7 billion acquisition of EMI Music from Mubadala Investment in June. And that’s just M&A.
The pair also did myriad fund-raisings and IPOs; you name it, they seemed to be running books for Japan Inc’s most prominent corporates.
On IPOs, the $1.2 billion TSE listing in June of Mercari, the biggest non-US float of an app-driven business, was a standout. The stock soared 77% on debut on the Tokyo Stock Exchange’s ‘market of the high-growth and emerging stocks’ AKA ‘mothers.’
Thanks to its MUFG tie-up, Jonathan Kindred’s Morgan Stanley Japan has indisputably become the best-connected, most-active and highest-profile foreign bank in the country.
As 2018 drew to a close, SoftBank’s Masayoshi Son signed up Nomura, Mizuho and SMBC, Deutsche Bank, Goldman Sachs and JPMorgan to handle his blockbuster $21 billion SoftBank telecoms IPO.
SoftBank has been a gift for Japanese investment banks, generating annual fees upwards of $300 million in recent years, and a good amount has gone into MUFG Morgan Stanley’s coffers. But, notably, MUFG Morgan Stanley passed on this deal.
Best private bank: Mitsubishi UFJ Morgan Stanley PB Securities
Is there anything MUFG’s dynamic joint venture with Morgan Stanley in Japan doesn’t do? The short answer appears to be not much.
In a market strangely absent of many of the bigger names of international private banking, Satoru Adachi’s Mitsubishi UFJ Morgan Stanley PB Securities dominates. By harnessing MUFG’s clear domestic muscle with one of US banking’s most-recognized names, this has become Japan’s go-to private bank. In the year to March 2018, the joint venture added about 2,000 extra high net-worth clients to its roster, amounting to ¥250 billion ($2.2 billion) in net new business.
It now boasts more than 35,000 clients, while total client assets under the venture’s management are about $30 billion. Little wonder that net revenues jumped 14.4% this year from last, and net profits of $112 million were up almost 30% year on year.
Those clients are served by 546 employees – 260 of them financial advisers – operating from four hubs in Tokyo, Osaka, Fukuoka and Nagoya.
Next on its agenda? More of the same, confirming its domination of Japanese private banking (although Asiamoney humbly suggests a less cumbersome trading name would be well received.)
Best digital bank: Rakuten Bank
Rakuten Bank is the big Japanese bank you may not have heard of. That may be because Rakuten – Japanese for ‘optimism’ – is better known as an e-commerce play, a 20-year-old site widely regarded as Japan’s equivalent of Amazon. But unlike Rakuten’s Hiroshi Mikitani, Jeff Bezos doesn’t (yet) own a bank.
Still, Bezos might accelerate such plans when he sees what returns the branchless Rakuten Bank has been making.
Mikitani founded Rakuten in 2000, three years after launching his main site, which now owns big tech names such as buy.com and the chat app Viber. But it’s the bank that has taken off in recent times, and its chirpy – and ubiquitous – ‘Happy Program’ promotion is hard to miss.
In the year to March 31, 2018, Rakuten reported income of ¥79.7 billion ($707 million), almost 13% higher than the previous year. Profit came in at ¥23.6 billion, a healthy 23.9% increase. The bank says its deposit balance is more than ¥2 trillion, and it now boasts ¥2.35 trillion ($20.8 billion) in assets.
Rakuten’s chef executive, Hiroyuki Nagai, says his bank has kept capital adequacy at a healthy 11.03%.
In a market where transformative fintechs have been relatively absent compared with neighbouring countries, Rakuten is a tech standout. It’s the first Japanese internet-based bank in Japan to have more than six million accounts, and more than three million Japanese have downloaded the bank’s easy-to-navigate app. All this has helped Mikitani lift his reported wealth to beyond $7 billion. A happy programme indeed.
Best bank for SMEs: MUFG
Arrive in any medium-sized Japanese town during April and there’s every chance you will be able to join a party. That would be MUFG’s ‘Rise up festa’ initiative – a celebration of and for Japan’s small and medium-sized businesses. It is all about unlocking Japanese creative spirit – and monetizing it.
MUFG’s boss Kanetsugu Mike delves into his client base and network to identify up-and-coming companies, be they in science, robotics, information technology or just a funky idea that needs help in catching on beyond its home base.
As MUFG describes Rise up festa, the programme aims to use the bank’s networks and know-how to “extend the boundaries” of growing SMEs.
It’s all very cheery, upbeat and very Japanese, one of the several stages MUFG methodically maps out for its journey nurturing local SMEs.
Another stage is MUFG’s ‘Regional revitalization fund’, which aligns with a government programme dubbed ‘Dynamic engagement of all citizens’ aimed at keeping communities active, productive and employed.
Under the plan, MUFG provides financing for SME procurement and working capital, and business advice to get projects underway.
In addition, there are the annual ‘Shobai hanjo’ conferences held across Japan that focus on sustaining and maturing small and medium-sized businesses.
Best bank for CSR: Sumitomo Mitsui Banking Group
Community and social responsibility as the ideal is understood – and practiced – elsewhere isn’t much of a thing in Japan. More nationalistically inclined Japanese bankers argue that such ideals are inbuilt into normal banking and business practice in the country: helping each other is just what Japanese banks do. But many shrug or draw a blank when asked about it, not entirely sure what it is, explaining that it is something for other countries where wealth is less evenly spread than Japan, where 90% of the people identify as middle class.
Takeshi Kunibe’s SMBC is an exception that proves the rule in Japan, recognizing that CSR is not just about corporate clean-up days with enthusiastic staff gadding about in baseball caps and trainers, but about delivering something more profound societally.
SMBC has launched green initiatives on environmental preservation at home and at its operations abroad, notably in Indonesia and Myanmar, ensuring its financing meets environmental targets, while tracking the recommendations of the G20’s task force on climate-related financial disclosures.
More recently, SMBC has promoted LGBT-related initiatives, increasing the female presence in traditionally male-dominated management ranks and promoting diversity and inclusion inside the bank and beyond.
Oh, and SMBC also does those baseball-hatted clean-up days too, a lot of them, and more.