Mitsubishi UFJ Financial Group Inc. will buy a stake in U.S. Bancorp for $936 million, deepening an alliance after selling its regional banking business to the US lender last year.
The deal effectively swaps debt owed by U.S. Bancorp to Japan’s biggest bank when it bought MUFG Union Bank in December 2022, according to statements by the companies. The proceeds will be used to repay some of the $3.5 billion U.S. Bancorp borrowed, with the rest due by December 2027.
Japanese banks have been expanding in the US and other regions in recent years as rock-bottom interest rates and weak economic growth stymie opportunities at home. MUFG sold Union Bank for $8 billion to focus on building its corporate and investment banking business in the US. It will continue with that strategy, a senior official said at a briefing on the deal Thursday.
Purchasing the 24 million shares will increase MUFG’s shareholding in U.S. Bancorp to 4.39%. The banks said the transaction will strengthen a strategic relationship that took hold when the Union Bank deal was completed.
“These opportunities would include digital, corporate transactions, financial services for Japanese customers, and global markets business,” MUFG said in its statement.
The Tokyo-based lender said it entered a dollar liquidity support agreement with a unit of U.S. Bancorp to strengthen its non-yen funding capacity. For MUFG and other Japanese banks, stable and cheap dollar funding has been one of the biggest challenges in building up business in the US, where they don’t have large a retail deposit base, making this another key prong of the agreement.
Read how Japanese banks’ dollar funding faces scrutiny
The share sale will boost U.S. Bancorp’s capital levels, increasing its CET1 ratio by about 20 basis points, the Minneapolis-based firm said.
MUFG has no plans to buy further stakes in U.S. Bancorp, the official said. The US lender said the remainder of the debt is due to be repaid in cash.
