Japan's Biggest Bank Wants to Get Bigger in the U.S.

TOKYO—Mitsubishi UFJ Financial Group Inc. is looking for more acquisitions to achieve its goal of becoming a top-10 lender in the U.S., the Japanese bank's chief executive said.

MUFG, Japan's largest lender by assets, last year combined its New York-based banking operations with wholly owned San Francisco-based Union Bank. In April, it brought in Steve Cummings, a former UBS Group executive, as the first non-Japanese head of its U.S. division.

"We integrated businesses in the East and the West and tapped Steve Cummings as the new CEO for our U.S. operations," said Nobuyuki Hirano, MUFG's chief executive in an interview. "Now we can map out a growth strategy with a sense of unity under the new management."

Over the past years, MUFG has expanded in the U.S. via acquisitions of small to midsize regional lenders through Union Bank, which the Tokyo bank made a wholly owned unit in 2008. In 2012, it acquired a California lender, Pacific Capital Bancorp, for $1.5 billion.

"We've been saying that our goal is to become a top-10 lender in the U.S.," said Mr. Hirano, who leads both MUFG and its core banking unit, Bank of Tokyo Mitsubishi-UFJ. "I think we need a scale-up of size because our revenue isn't sufficient to cover the rising cost of complying with legal and regulatory frameworks."

According to SNL Financial data as of December 2013, which MUFG has cited in a presentation to investors, the Union Bank-BTMU combined entity ranked 13th in the U.S. with deposits of $115 billion, right behind Atlanta-based BB&T Corp. with deposits of $127 billion. At No. 10, State Street Corp. had about $182 billion in deposits.

In contrast to Japan, where MUFG has plenty of deposits but faces sluggish loan demand, MUFG says it has healthy loan demand in the U.S. and deposits haven't kept up. In some cases, it is raising U.S. dollar funds via a currency swap from yen to dollars.

"We'll consider an acquisition to complement our service and products and shore up deposits in dollars," Mr. Hirano said.

In the year ended March 2015, MUFG became the second Japanese company after Toyota Motor Corp. to post a net profit of more than ¥ 1 trillion ($8.3 billion), boosted by strong performance in its overseas operations. About 20% of the profits came from international businesses including Union Bank and Bank of Ayudhya in Thailand, which MUFG acquired in 2013.

MUFG also has enjoyed profits from its 20% stake in Morgan Stanley.

Mr. Hirano, 63, said a possible interest-rate increase by the Federal Reserve this year could cause market turmoil and generate unexpected losses from volatility in the short term. "We'll try to deal with managing risk," he said.

Write to Atsuko Fukase at [e-mail]

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September 11, 2015 11:35 ET (15:35 GMT)

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