Mitsubishi UFJ Financial Group Inc. said its brokerage venture sold Credit Suisse Group AG’s riskiest bonds to help clients diversify their portfolios, as the firm tries to explain what led to $700 million of losses for customers.
(Bloomberg) — Mitsubishi UFJ Financial Group Inc. said its brokerage venture sold Credit Suisse Group AG’s riskiest bonds to help clients diversify their portfolios, as the firm tries to explain what led to $700 million of losses for customers.
The firm continues to examine its sales practices for these products, known as Additional Tier 1 notes, said Shinjiro Yamamoto, managing executive officer of Mitsubishi UFJ Morgan Stanley Securities Co., at an earnings briefing in Tokyo that was dominated by questions about these transactions. The bonds were sold to 1,300 individuals and 250 corporate accounts, he said.
“We started selling AT1 notes of this European financial institution after seeing customer demand for portfolio diversification” in issuers and regions, Yamamoto said, adding the sales had been going on for the last few years.
The wipeout suffered by MUFG clients who bought the AT1 bonds make up the bulk of losses in Japan, where investors bought about 140 billion yen ($1 billion) of these products. Finance Minister Shunichi Suzuki has said securities firms must make every effort to deal carefully with their customers, and the country’s financial regulator has said brokerages must give thorough explanations to affected clients.
Switzerland’s rescue last month of Credit Suisse wiped out the AT1 bonds issued by the bank, leaving global investors with about $17 billion in losses. The Japanese brokerage, one of two joint ventures of MUFG and Morgan Stanley, isn’t able to say yet if there were any improper sales cases, according to Yamamoto. It plans to check whether clients understood the risks of their purchases through follow-up discussions with them over coming days, he said.
“I don’t think there was any problem in sales practices because we understand that our employees have followed the rules, offering customers explanations,” Yamamoto said. “However, we certainly find it necessary to confirm details with each client.”
MUFG’s approach on the AT1 sales contrasts with several major financial firms in Asia. Nomura Holdings Inc. said this week it decided against selling these bonds to individual retail clients because they could become worthless under some conditions, while United Overseas Bank Ltd. in Singapore said it advised clients to get out of this Credit Suisse debt last year.
Doubling Profit
Yamamoto said the company intends to “firmly proceed” with its business of proposing portfolios to clients through its wealth management and business advisory services. “We of course are taking the latest incident seriously and will consider making changes to upgrade our services if we find anything that needs reviewing,” he added.
Net income at Mitsubishi UFJ Morgan Stanley Securities more than doubled to 13 billion yen in the fourth quarter compared to a year ago, according to a statement, the best performance in five years.
–With assistance from Taiga Uranaka.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.