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Mitsubishi UFJ (MUFG) Expands in Asia, To Buy Home Credit Units

Mitsubishi UFJ Financial Group, Inc. MUFG, also known as MUFG, announced plans to acquire respective 100% and 80% stakes in Home Credit B.V.’s units — HC Consumer Finance Philippines, Inc. (HC Philippines) and PT Home Credit Indonesia (HC Indonesia).

Home Credit is a consumer finance company headquartered in the Netherlands and is engaged in consumer lending, primarily in point-of-sale (POS) loans. Markedly, MUFG has a presence in the Philippines and Indonesia through investments in Security Bank Corporation and PT Bank Danamon Indonesia Tbk. Hence, with these acquisitions, the bank seeks to further expand its retail business in both countries.

This aligns with MUFG’s aim to strengthen business in Southeast Asia by establishing business platforms in the region by collaborating with partner banks. The move will also help the company in benefitting from growing consumption in emerging markets amid limited opportunities in Japan due to low rates.

The buyouts will be made for €596 million (around ¥87 billion) through MUFG’s Japanese unit MUFG Bank, Thai unit Bank of Ayudhya Public Company Limited and Indonesian unit PT. Adira Dinamika Multi Finance (ADMF).

The acquisition, conditional on the receipt of approvals from the relevant regulatory authorities, is expected to be closed in 2023.

Post completion, Bank of Ayudhya Public Company Limited will hold 75% shares of each HC Philippines and HC Indonesia, MUFG Bank will hold 25% of HC Philippines’ shares, and ADMF will hold 10% shares of HC Indonesia.

Home Credit leverages the superior user interface/user experience of its app, which makes loan application a seamless process. With this, it has a dominant market share in terms of POS loans, with a cumulative total of 13 million loan customers in both countries.

Notably, over the last several years, MUFG has been expanding inorganically and continues to pursue global growth opportunities.It remains focused on its updated medium-term business plan (2021 to 2023), which includes the upgradation and reformation of its business model and exploration of new business areas.

In this regard, MUFG aims to develop its business model to cope with the adverse changes in the domestic or overseas business environment, and achieve sustainable growth. Through such efforts, it aims to achieve a return on equity (ROE) of 7.5% by the end of 2023.

Over the past year, shares of MUFG have declined 6.4% compared with an 8.8% fall recorded by the industry.

 

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

Inorganic Growth Efforts by Other Firms

Of late, banks have been thriving to expand through acquisitions amid a challenging operating environment. Last week, Washington Federal, Inc. WAFD announced its plan to enter the lucrative and “fast-growing” California market. The company signed an agreement to acquire Luther Burbank Corporation LBC and its wholly-owned subsidiary, Luther Burbank Savings, for $654 million.

Washington Federal is expected to use the deal as “a platform for growth in attractive California markets.” The company intends to enhance multi-family loan origination capabilities and expand commercial banking activities to Northern and Southern California. At present, LBC operates in California, Washington and Oregon through 11 full-service branches and seven loan production offices.

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