Thursday, October 30, 2008

ZR Homework..

Mitsubishi UFJ Financial Group Inc. announced that they will raise up to $10.6 billion by issuing new shares over the next year, shoring up its balance sheet in the wake of a massive investment in Morgan Stanley.

The Japanese banking giant said it will issue up to 600 billion yen ($6.5 billion) in common shares in the one-year period from Nov. 4. It will also issue 390 billion yen ($4.2 billion) in a private allocation of preferred shares to take place in November.

Mitsubishi UFJ announced the capital raising two weeks after completing its $9 billion purchase of a 21 percent stake in Morgan Stanley. It was a life-saving deal for the Wall Street icon which had teetered on the brink of collapse as its market value plummeted.

Many Japanese banks had solid finances compared to overseas rivals as the current financial crisis unfolded, and moved to take advantage with cheap purchases abroad. But the spending spree is now forcing such banks to recapitalize, particularly as the fallout from Wall Street's meltdown begins to pressure them in their home market.

"With strategic investments domestically and abroad, as well as reinforcing the overall strength of the group through reorganization, we have put the pieces in place for future growth," Mitsubishi UFJ said in a statement.

Ratings agency Standard & Poor's said Mitsubishi UFJ's share issue won't result in a higher credit rating as the capital increase only serves to offset the capital decrease involved in buying the Morgan Stanley stake. Mitsubishi UFJ used cash to finance the investment in Morgan Stanley.

S&P also warned that the recent slowdown of Japan's economy and falling stock prices are increasing pressure on Mitsubishi UFJ's asset quality.

"Furthermore, the company's profitability is also being pressured by reduced demand among borrowers and a decrease in fee income, mainly from sales of investment trusts," it said in a statement.

The Mitsubishi UFJ announcement came after the stock market closed Monday, but Japanese media had widely reported that it and other banks were planning to issue new shares to boost reserves after splashing out on acquisitions abroad. Nomura Holdings bought the Asian and European divisions of failed US investment bank Lehman Brothers.

The reports sent bank shares down sharply during trade Monday as investors sold on dilution fears. Mitsubishi UFJ shares plummeted 14.6 percent to 583 yen and Nomura fell 14.3 percent to 904 yen.

The benchmark Nikkei 225 index shed 486.18 points, or 6.4 percent, to 7,162.90 _ the worst closing level since October 1982.



Mitsubishi UFJ Financial Group Inc will be issuing new shares over the coming one year to boost the balance sheet due to the mammoth investment in Morgan Stanley.

Mitsubishi UFJ Financial Group Inc said that it will be issuing 600 billion yen ($6.5 billion) in common shares in the one-year period from Nov. 4 in a private allocation of private shares.

Mitsubishi UFJ Financial Group Inc. also announced that the capital raised is two weeks after completing its $9 billion purchase of a 21 percent stake in Morgan Stanley. As an Wall Street icon, Morgan Stanley was saved by the big purchase of stocks by Mitsubishi UFJ Financial Group Inc.Morgan Stanley was on the edge of the cliff and market value dropping untill the Samurai banking giant came along.

Most Japanese banks have large pool of financial reserves compared to overseas competitors. They take the opportunity and are buying cheaper shares from aboard. Mitsubishi UFJ is no different, with strategic investments locally and abroad, as well as enforcing the overall growth and ability of the group through re-organization, even in times of trouble , they have a place to fall on.

Ratings agency Standard & Poor's said Mitsubishi UFJ's share issue won't result in a higher credit rating as the capital increase only serves to offset the capital decrease involved in buying the Morgan Stanley stake. Which only will reflect well on the balance sheet. Mitsubishi UFJ pumps in cash to support Morgan Stanley. The slowdown of Japan's economy and falling stock prices are also pressuring on Mitsubishi UFJ's asset quality.

The company's profitability is also being pushed down by reduced demand among borrowers and a decrease in fee income, mainly from sales of investment trusts.

Japanese media had widely reported that Mitsubishi and other banks were planning to issue new shares to boost reserves after the buying splur in overseas market. Nomura Holdings bought the Asian and European divisions of failed US investment bank Lehman Brothers.

The reports sent chill down a person's spine when bank shares dipped sharply during trade on Monday as investors sold on dilution fears. Mitsubishi UFJ shares plummeted 14.6 percent to 583 yen and Nomura fell 14.3 percent to 904 yen.

The benchmark Nikkei 225 index shed 486.18 points, or 6.4 percent, to 7,162.90 _ the worst closing level since October 1982.

Posted by dear benji at 9:00 AM