Mitsubishi UFJ Financial Group Inc.'s brokerage unit may invest in Taiwan's Yuanta Financial Holding Co. and South Korea's Daewoo Securities Co. as part of a push to double overseas revenue, the head of the division said.

``We are now talking about a new business alliance'' with Yuanta, Yasumasa Gomi, chief executive officer of Mitsubishi UFJ Securities Co., said in an interview with Bloomberg Television. ``We want to strengthen our relations with Daewoo Securities.''

The talks with Yuanta, owner of Taiwan's largest brokerage, and Daewoo, Korea's third-biggest securities firm by market value, may lead to investments in the two companies, Gomi said.

Mitsubishi UFJ Securities aims to increase the share of overseas revenue to 40 percent from about 20 percent now, said Gomi, 65. The company has invested more than $1 billion in the past two years in five companies from China to Singapore, vying with local rivals including Daiwa Securities Group Inc. for acquisition targets in faster-growing Asian economies.

Acquiring overseas securities firms also offers a way for Mitsubishi UFJ, armed with about $31 billion of cash and cash equivalents, to counter a lack of lending growth in Japan.

``The mega-banks are probably going to be looking much more overseas,'' said Brett Hemsley, an analyst at HSBC Holdings Plc in Tokyo. ``They're going to be generating capital in excess of what they can reasonably deploy at home.''

Kim Eng

The Tokyo-based brokerage, wholly owned by Mitsubishi UFJ, may buy a stake in Yuanta as part of an alliance including private banking, Gomi said. He declined to elaborate on the size of the potential investments in Yuanta and Daewoo.

Mitsubishi UFJ Securities raised its holding in Kim Eng Holdings Ltd., Singapore's largest publicly traded brokerage, to 14.6 percent last month by buying an 11 percent stake for S$166 million ($121 million). Yuanta is Kim Eng's biggest shareholder.

The Japanese brokerage set up an alliance with Daewoo Securities in January 2007 in investment banking and corporate finance, as part of its efforts to tie up with the biggest domestic financial institutions in each Asian market, according to Gomi.

Mitsubishi UFJ Securities' profit tumbled 82 percent to 8.1 billion yen ($78 million) in the year ended March 31, as trading revenue, fees and commissions declined in a market slump triggered by the U.S. subprime-mortgage crisis.

India Strategy

Still, the unit didn't invest in subprime-related securities, sidestepping the plummeting valuations that caused 413.3 billion yen of trading losses at rival Mizuho Financial Group Inc.'s securities arm.

Kim Eng, one of the largest brokers in Indonesia, Thailand and the Philippines, will help Mitsubishi UFJ extend financial services to Japanese and foreign companies operating in those markets. The two firms aim to set up a S$1 billion fund to invest in Asian equities by the end of 2009, they said in a joint statement in November.

In India, Mitsubishi UFJ Securities said last month it set up a subsidiary to offer local companies fund-raising options in Japan and to provide cross-border merger and acquisition services to Japanese and Indian companies. The brokerage has been working with ICICI Bank Ltd., India's second-biggest bank by market value, to offer merger advisory services and buy Indian assets.

Rival Sumitomo Mitsui Financial Group Inc., Japan's second- largest bank by market value, agreed to buy a 15 percent stake in Vietnam Export-Import Commercial Joint-Stock Bank for $225 million in November. Daiwa Securities, Japan's second-largest securities firm, may increase its 1.25 percent stake in Saigon Securities Inc., Vietnam's biggest publicly traded brokerage, Daiwa's incoming chairman Akira Kiyota said last month.

(Source: bloomberg.com, 2008-5-15)