Morgan Stanley is teaming up with its largest investor, Japan’s Mitsubishi UFJ Financial Group, to form a mega-investment bank that could rival Citigroup and JP Morgan Chase. The Financial Times broke the news that the deal will likely be announced later today.
The venture has been under discussion since October, when MUFG bought $9 billion of convertible preferred shares in Morgan Stanely, which amount a 20% stake in the Wall Street institution. The venture would be able to draw upon MUFG’s existing US loan boase of $70 billion plus Morgan Stanley’s $30 billion.
The idea behind it is to improve Morgan Stanley’s competitiveness in investment banking by coupling it with a big lending business. Big lenders often argue that long term relationships they’ve developed through lending help them win investment banking business. US law prohibits banks from formally tying lending to investment banking business, but these things are usually done with an understanding that a bank providing a large credit facility will get the first bid at underwriting bond issuances or advising on acquisitions.
People close to the situation said the joint venture between Morgan Stanley and MUFG will divide profits on a deal-by-deal basis, the Financial Times reports.
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