Mitsubishi UFJ Financial Group (MUFG) has bought a U.S. commercial loan portfolio from Deutsche Bank with a value of $3.7 billion (£2.4 billion).
The deal will move the Japanese bank from being the 17th largest real estate lender to ninth place in the United States. The purchase will also serve to diversity the lender’s property portfolio and allow it to use its excess capital.
Several European banks are actively seeking buyers for loan portfolios and looking to raise capital to meet new regulatory norms under Basel III requirements. The all-cash deal is likely to be completed later in the year and does not require any regulatory approval. MUFG has not disclosed the exact amount it paid in the transaction in its presentation.
The bank stated that U.S. commercial property prices have recovered from the lows they hit in 2009.
Just over half (52 per cent) of loans are made to properties in the top three metropolitan areas of the country: New York City, Los Angeles, and Chicago.
MUFG, along with Muzho Financial Group and Sumitomo Mitsui Financial Group, have been looking for distressed assets to acquire, since demand for loans has slowed at home.
Overseas purchases have increased the foreign share of total outstanding loans for the three large banks to 20 per cent for the quarter ending in September 2012, compared with the quarter ending in March of 2010, according to Moody’s Investors Service.
Mitsubishi UFG bought a $6.4 billion project financing loan book from Royal Bank of Scotland in 2010. Recently, Mizuho acquired a Brazilian unit of Germany’s WestLB for approximately $380 million.
Moody’s Investors Services senior analyst Tetsuya Yamamoto said he expects the pace of overseas activity by Japan’s top three banks to slow down, since their foreign currency funding is not that strong in comparison to their Japanese yen liquidity.
While the Japanese banks have been looking at buying minority equity stakes in some Asian banks, it would be a drain on their core capital.
Yamamoto stated, “From a regulatory capital perspective, acquisition of loans would make more sense than a minority stake in a foreign bank.”
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