MUFG Targets Strategic Acquisitions to Boost Presence in India
Mitsubishi UFJ Financial Group Inc. (MUFG), Japan's largest bank, is accelerating its expansion in India, actively seeking acquisition opportunities that will strengthen its presence in the world’s most populous nation. Yasushi Itagaki, head of MUFG’s global commercial banking division, disclosed in a recent interview that the bank aims to significantly increase investments and acquisitions in India, with a long-term goal of generating a 20% annual return on these investments within the next decade.
India's position as a rapidly growing economy with strong ambitions to become a global manufacturing leader aligns with MUFG's strategic interests. The country's booming energy sector, driven by growing demand and substantial investments in renewable energy projects, offers fertile ground for MUFG's finance and investment services. “India’s economic fundamentals are solid, and its political landscape is stable”, Itagaki stated, noting that these conditions are conducive to growth in the financial sector.
MUFG is not alone in recognizing India’s potential. The bank is in competition with other global and Japanese financial giants aiming to capitalize on India’s growth. Rivals such as Mizuho Financial Group Inc. have invested in Indian financial services startups, while Sumitomo Mitsui Financial Group Inc. is considering further expansion into the Indian market despite regulatory obstacles. The allure of India’s strong economic growth rate — 6.7% GDP growth in the April-June 2023 quarter and its potential as the fastest-growing major economy continue to attract attention from foreign investors.
However, rapid growth comes with its challenges. Retail loan defaults have been rising in India, attributed in part to aggressive lending practices. This increase in defaults has raised concerns about potential ripple effects on India’s stock market and broader economy, which foreign banks will need to navigate carefully.
MUFG already maintains a significant presence in India’s financial landscape. The bank leads in foreign currency loans in India, ahead of major players like HSBC Holdings Plc and DBS Group Holdings Ltd., according to Bloomberg data. MUFG also operates a major back-office support unit in India, established in 2020, which currently employs around 1,500 people to support its global operations. Itagaki plans to double the headcount of this unit over the next three years, further embedding MUFG’s operations in India.
As the lead for MUFG’s expansion across Asia, Itagaki envisions India and digital operations as critical growth drivers. In fact, MUFG’s future business model is symbolized by Itagaki as 'Mickey Mouse', with the face representing global commercial banking targeted to deliver a 15% return on equity within a decade, while the two 'ears' India and digital are expected to achieve 20% annual returns. In the digital realm, MUFG is exploring acquisitions or investments in Asia's fintech sector, specifically targeting online consumer lenders.
India represents a new frontier for MUFG, contrasting with the bank’s previous focus on Southeast Asia, where it has established strong footholds in Thailand, Indonesia, and other countries over the past decade. “Our history and experience in India are still in early stages compared to Southeast Asia”, admitted Itagaki. “But we cannot just sit on our hands. This is something we will learn as we engage and manage businesses here”.
