Japan banks scramble to beef up asset management business amid govt reform push (updated)

Sumitomo Mitsui Trust

21/12/2023 23:26

(Adds Mitsubishi UFJ's M&A pursuit in paragraph 12)
    By Makiko Yamazaki and Ritsuko Shimizu
       TOKYO, Dec 22 (Reuters) - The Japanese government's
reform push for the country's $5 trillion asset management
industry has sparked a series of action plans from top Japanese
banking groups to beef up their long overlooked asset management
business.
    Asset management has emerged as an area of focus for the
banks this year as the financial regulator sought their help to
shake up the industry in line with Japan's policy pledge to turn
dormant household savings into investments.
    The business could potentially become a major profit centre
for the banks if an end to decades-long deflation drives
households to shift their money out of bank deposits into
stocks, bonds and other assets to hedge against inflation.
    "We aim to build up the asset management business as the
group's fourth pillar after banking, trust banking and
brokerages," Mitsubishi UFJ Financial Group's chief executive
Hironori Kamezawa told Reuters in an interview.
    Japan's top banking group now aims to double the amount of
assets under management to 200 trillion yen ($1.4 trillion) by
March 2030, he said. "We will utilise resources across the group
to do this."
    Specific steps include hiring asset managers and making more
use of the group's other businesses such as project finance
loans to diversify products, Kamezawa said.

    LAST CHANCE
    After years of failing to bring about a change in investment
habits of households, the Japanese government is reviving its
effort again, warning that cash that households are holding onto
would be worthless in an inflationary environment.
    The asset management industry is central to achieving this
policy, but the government worries that the industry, dominated
by those affiliated with large financial groups, may have been
under resourced.
    Showing commitments to the government's reform drive, No. 2
Japanese lender Sumitomo Mitsui Financial Group  8316.T 
revealed a plan in September to shift some bankers from the
proprietary trading business to the asset management business to
help enhance a product line-up.
    Sumitomo Mitsui Trust Bank  8309.T , one of Japan's top
trust banks, plans to invest 500 billion yen ($3.48 billion) to
expand its asset management business by 2030, including
acquisitions of boutique asset management firms, Kazuya Oyama,
the head of the bank told Reuters in an interview.
    The bank particularly aims to grow in private asset markets,
including private equity, private credit and infrastructure, to
allow a broader range of clients to access such illiquid assets
in Japan, he said.
    Similarly, Mitsubishi UFJ, which recently bought
London-based private credit firm AlbaCore Capital, is looking
out for more M&A opportunities in private asset markets, CEO
Kamezawa said. 
    Investing in private assets, which can lead to higher
returns, "has not been rooted in Japan yet," Sumitomo Mitsui
Trust's Oyama said. "We want to democratise this asset class so
that ultimately individual investors can access such assets and
receive returns."
    "There were no issues with keeping money in bank deposits
during the decades of deflation," Oyama said. With emerging
signs of sticky inflation, however, people would have a sense of
urgency that they have to do investment, he added. "I think this
is our last chance (for reviving the industry)."    

($1 = 143.8800 yen)

 (Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by
Michael Perry and Christopher Cushing)
 ((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))