Suckers wanted

8 August 2008 By Martin Hutchinson

Mitsubishi UFJ s purchase of the remaining minority stake in the US s Union Bank may look reasonable. But MUFJ lost the equivalent of five years of Union s profits on subprime. With better opportunities and stronger bank balance sheets in Asia, Japanese banks should focus there.

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Mitsubishi UFJ Group on August 12 offered $3bn to buy the remaining 35% of Union Bank of California that it does not own. UBC made $608m profit in 2007. The price of $63 a share represents two times book value.

Bank of Tokyo bought Union Bank from Standard and Chartered PLC in 1988 for $750m; it was merged with First California Bank, controlled by Mitsubishi Bank, when Bank of Tokyo and Mitsubishi merged in 1995.

Mizuho paid $1.2bn to Merrill Lynch for preferred shares in January and Sumitomo Mitsui invested $930m in Barclays in June.

Japanese banks reported losses of about $18bn from US subprime mortgages in the year to March 2008. Mitsubishi UFJ had $2.9bn of losses from subprime mortgages and other US securitised products. The three major banks all had capital ratios above 10% at March 2008.

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