Japan's Mitsubishi UFJ Financial Group said it has no plans to invest in Lehman Brothers denying a media report that it may bid for a stake in the subprime-hit US investment bank. The Times of London said Japan's largest bank was ready to bid for a "substantial stake" of Lehman, and may seek control of the Wall Street firm, sending shares of the US bank higher in after-hours trade.
Lehman is under pressure to raise capital after racking up $7 billion in losses and write-downs from the global credit crisis. It still has more than $60 billion of mortgage and commercial real estate exposure.
The Times, citing senior sources close to MUFG and source at a Tokyo brokerage, said the bid would likely come after an expected fall in Lehman's stock price following its quarterly earnings results next week. However, a spokesman for Mitsubishi UFJ, Hideki Furumoto, told Reuters the report was not true. Separately, an executive at the Japanese bank said it had "absolutely no plans" to invest in Lehman. The executive spoke on condition of anonymity. Lehman Brothers declined to comment on the report.
Shares of the Wall Street firm later rose in extended trade. They had risen 5 percent in regular trade on a separate report that HSBC Holdings is among potential buyers for the bank. Shares of Mitsubishi UFJ finished Thursday down 2.9 percent at 793 yen, slightly outperforming Tokyo's bank index, which fell 3.3 percent IBNKS. One Tokyo analyst said a bid by Mitsubishi UFJ would be a large gamble, given the fallout from the US subprime crisis.
"It would be a huge risk to make a large investment when the future of the US financial industry is uncertain and when it's not clear if there will be an end to the chaos in the near future," said Katsuhito Sasajima, Japan bank analyst at J.P. Morgan.
"Conditions in Japan are not good either, and I simply doubt that they are seriously considering a large investment," he said. While Japanese banks have largely avoided the massive subprime losses that tore through Wall Street, they are saddled with a slowing domestic economy and a grim outlook for lending at home.
The Times report is the latest about potential suitors for Lehman, which is under pressure to raise capital before announcing its quarterly results. State-controlled Korea Development Bank has said it is in talks with Lehman about a possible joint investment with other Korean banks, but was unsure whether there would be a deal.
HSBC, also reported to be interested in Lehman, is unlikely to make a move, people familiar with the matter have told Reuters. Mitsubishi UFJ last month bid $3.5 billion to take full ownership of US regional bank UnionBanCal a move that some analysts have described as the start of a broader expansion strategy.
Mitsubishi UFJ executives had said prior to the UnionBanCal bid that the bank would be interested in an investment as part of a strategic alliance with a Western firm. Analysts such as Hironari Nozaki at Nikko Citigroup have said Mitsubishi UFJ would likely look to acquire a commercial bank. A senior executive at the bank told Reuters in an interview last year that it could buy a commercial bank in the United States or Europe if presented with the right opportunity. The bank is also likely to spend more than $910 million to raise its stake in consumer lender Acom Co sources told Reuters last week.
Comments
Comments are closed.