Mitsubishi UFJ Financial Group (MUFG) is planning to set up a back-office centre in Manila to handle operations for Asia outside Japan, sources with direct knowledge of the matter said.
The move is part of Japan’s largest lender’s efforts to improve the efficiency of its global operations, as the global banking industry faces weak revenue growth prospects in an ultra-low interest rate environment.
On the domestic front, MUFG and its local peers have been aggressively expanding overseas in recent years to make up for a weak lending business in Japan.
But with the global economy weak, the banks are finding that revenues are not growing fast enough to justify an increase in expenses, prompting them to review costs.
Setting up an back-office centre would be a positive move as the market attention is shifting to expense ratios of Japanese banks, including those of overseas operations, Ken Takamiya, analyst at Nomura Securities, said in a note to clients.
“While its short-term impact on MUFG’s earnings is likely to be limited, it could lead to meaningful improvement in cost efficiency of overseas operations in the middle to long term,” he said.
MUFG is planning to start the centre in the Philippines’ capital in its next financial year beginning April, taking over some back-office operations at branches in Singapore and Australia, said the sources, who were not authorised to discuss the matter publicly.
The centre will start with several dozen staff, which will be eventually expanded to several hundred over some years, the sources said, transferring back-office operations from the bank’s other locations in Asia.
The bank chose Manila given the Philippines’ English-speaking population and its relatively low labour costs, they said. In April, MUFG bought a fifth of mid-sized Philippine lender Security Bank Corp for $790 million.
MUFG has about 8,000 employees in its commercial banking operations in Asia and Oceania regions outside Japan.
An MUFG spokesman declined to comment.
In continental Europe, MUFG is planning to make its Dutch unit its headquarters, bringing most of the region’s branches, including those in Dusseldorf and Madrid, under it to consolidate administration and product development functions in Amsterdam.