MUFG becomes latest Japanese megabank to expand in Asia with India deal

Mitsubishi UFJ Financial Group Inc.'s plan to buy a stake in India's DMI Finance Pvt. Ltd. is the third recent deal by a Japanese megabank that targets Asia's higher-growth economies.

Japan's biggest bank by assets will take a minority stake in the Indian digital nonbanking financial company for 19.1 billion Indian rupees and aims to complete the deal by mid-April, a bank spokesperson told S&P Global Market Intelligence.

"All three megabanks [of Japan] … are expanding in emerging ASEAN and India given the growth in these regions and trade and industry linkages between them and developed countries," said Michael Makdad, a senior analyst at Morningstar.

Stung by low interest rates and a declining domestic population, MUFG, Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are turning to Asian markets where economies are expected to grow faster than in Japan. The US Federal Reserve's continued tightening of its monetary policy could prevent Japanese banks from making a big bet on the world's largest market.

MUFG's April 3 announcement followed Sumitomo Mitsui Financial's March 27 announcement that it agreed to buy a 15% stake in Vietnam Prosperity Joint Stock Commercial Bank. Mizuho Financial announced that it has invested US$125 million into Kredivo Holdings Ltd., a digital financial services provider in Indonesia, on March 23.

"They [Japanese megabanks] want to increase a footprint in Asia to expand a customer base and services," Toyoki Sameshima, a senior analyst at SBI Securities Co., told Market Intelligence. "They will continue to so do as they have ample cash."

The economies of India, Vietnam and Indonesia are expected grow by 6.1%, 6.2% and 5.0% in 2023, respectively, while Japan's growth is forecast at 1.6% according to the International Monetary Fund.

As of March 31, US$1 was equivalent to 82.12 Indian rupees.