MUFG builds new bond teams to chase market share on Wall Street

Mitsubishi UFJ Financial Group says it’s ready to compete with the biggest banks on Wall Street in fixed income after adding teams for trading mortgage-backed securities and underwriting non-investment grade debt in the US in 2016.
Geoff Coley, the New York-based head of international securities business at the bank, said in an interview that MUFG will continue to hire for expansion, though investment will be more gradual in 2017 as the company focuses on executing client orders and deals.
The Japanese bank has a capital and business alliance with Morgan Stanley dating back to the global financial crisis, and is restricted in underwriting notes for some companies in the US based on the agreement.
“I don’t think we would enter the arena unless we felt we were 100% able to compete both on price, on execution and capability,” said Coley, whose previous roles before joining Japan’s largest bank in May 2014 included more than two decades at Citigroup. “The overarching goal is to increase our market share, our presence and relevance to clients.”
MUFG and Japanese banking rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group have been expanding their fixed-income securities businesses in the US as they chase higher fees and seek to harness bank lending relationships with the world’s biggest multinationals.
While MUFG and Morgan Stanley run two brokerage joint ventures in Japan, their securities businesses operate independently elsewhere around the globe.
“Your clients demand that you are global and that you are able to service them in all major markets,” said David Threadgold, the Tokyo-based Asian research head at Keefe Bruyette & Woods, a boutique investment bank. “It is not completely ridiculous for them both to be pitching for the same piece of business.
You just need to be able to manage it so that nobody gets upset.”
On MUFG’s partnership with Morgan Stanley, Coley said “we try to manage it so there are no bumps – that is impossible in any relationship, of course, – but the answer is it works pretty smoothly.”
Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment on how it manages its relationship with MUFG in the US
MUFG’s securities business had 86 people in its debt capital markets and credit trading teams in the US at the end of November, according to the Tokyo-based bank, up 16% from when Coley joined the firm.
Among key appointments in 2016, the firm hired Grant Moyer from Goldman Sachs Group to head its leveraged finance team that is co-run by the lender’s securities and banking units, according to the company. “There is a market for MUFG to become a real fixed-income powerhouse on Wall Street,” said Loomis Sayles & Co Vice Chairman Dan Fuss, citing a pull-back by banks in the making of markets for bond trading. “Their timing would be perfect.”
Japan’s three-biggest banks boosted underwriting of US investment-grade bonds by 44% last year to over $90bn, while the top five US lenders reduced sales by a combined $29bn to $631bn. MUFG also established a Canadian brokerage subsidiary in 2016 to underwrite debt and equity securities for Canadian dollar-denominated issuance.
Some firms including Royal Bank of Scotland Group and Morgan Stanley have cut back staff in their fixed-income trading as new regulations and low interest rates have crimped profits.
“Many of the financial counterparties that were available to our clients before the crisis have become weakened since,” said MUFG’s Coley.