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A Wise Decision?

UFJ has $42 billion of bad debts and it may face criminal charges after regulators found it systematically forged minutes of meetings and shredded documents to conceal non-performing loans that fueled $20 billion of losses in the past three years, Bloomberg reported. Government reports on August 13th showed a slowing of recovery in Japan's economy, making it harder for UFJ's clients to boost profits to repay their loans.

High Court Clears Way for Mitsubishi UFJ Holdings

August 12, 2004. Tokyo High Court overruled the lower court's decision saying that once the trust between Sumitomo and UFJ was broken there was no point in enforcing the original agreement and UFJ could go ahead with its merger plans with Mitsubishi Tokyo.

Sumitomo had offered 500 billion yen to pay off UFJ Holding major bad loans, that was upped by 700 billion yen offer by Mitsubishi Tokyo bank. Sumitomo has indicated that it won't give up the fight but analysts think that Mitsubishi UFJ holding is here to stay. Sumitomo won't try for a hostile takeover.

[New York Times] In a joint statement Thursday, the banks said they thought that combining forces would create a stronger bank with a more diversified loan portfolio than either has now on its own. Currently, Mitsubishi Tokyo caters primarily to corporate clients while most of UFJ's borrowers are consumers and small businesses. The banks argue that they are also a good fit geographically, with most of Mitsubishi Tokyo's branches in and around Tokyo in eastern Japan, while UFJ, based in Osaka, has a stronger presence in western Japan.

UFJ Appeals to Tokyo High Court

August 4, Tokyo. The Tokyo District Court on Wednesday dismissed an appeal by UFJ Holdings against a ruling that ordered the entity not to proceed with merger talks involving UFJ Trust Bank. Upon hearing the ruling, UFJ Holdings immediately appealed to the Tokyo High Court. Observers say the high court will make a ruling on the issue in about two weeks. [Mainichi Shimbun]

Sumitomo Trust Wins in Court; UFJ and Mitsubishi Tokyo Talks Continue

August 3, 2004. Tokyo. A Tokyp court ruled last week that UFJ's trust business should be sold to Sumitomo Trust & Banking, honoring a May 2004 agreement. Problem is that UFJ's trust unit is profitable (37 billion yen last year)while the parent lost 403 billion yen. Mitsubishi does not want to give it up.

According to latest news, UFJ wants to merge with Mitsubishi Tokyo, and both might do so in two-stage, according to Shigemitsu Miki, chairman of Mitsubishi Tokyo's main banking unit. They plan to merge their trust businesses in the second stage after the agreement to sell UFJ's unit to Sumitomo expires on March 31, 2006.

Mitsubishi Trust & Banking Corp. has 20.1 trillion yen of assets and it earned 130 billion yen last year. Sumitomo Trust has 15.4 trillion yen of assets and had profit of 79.6 billion yen. UFJ Trust had 6.3 trillion yen of assets while UFJ Holdings' assets total 82.1 trillion yen. Mitsubishi Tokyo is planning to boost UFJ's capital by the end of September to reduce its bad loans. [Bloomberg and Yomiuri}

Sumitomo Trust & Banking Tries to Halt Merger talks

July 15, 2004. [IHT/Asahi] The day UFJ and Mitsubishi Tokyo formally announced their intent to integrate their operations by September 2005, Sumitomo Trust asked Tokyo District Court to halt their talks on grounds that UFJ earlier had promised Sumitomo its trust banking unit.

Sumitomo Trust is claiming that UFJ and it had a basic agreement reached on May 21 stipulating that both sides have exclusive negotiation rights and included a provision requiring either party to pay penalty fines should it violate the agreement. UFJ is likely to counter that the agreement was provisional. Sumitomo Trust and UFJ were scheduled to sign a formal contract on July 22.

Sumitomo Trust thinks that UFJ was interested in them solely to tide over its financial difficulties since it was under pressure to raise funds to clean up its bad loan mess. The anticipated 300 billion yen in proceeds were to go toward bolstering its capital base. However, once UFJ decided that 300 billion yen was not enough, it started looking elsewhere. UFJ owns 1.5 trillion yen in taxpayer money.

At UFJ's request, Sumitomo Trust had even agreed to move forward the date of merger to this autumn. They had initially planned to merge by the end of March.