Mitsubishi UFJ Financial Group Inc.’s wealthy clients lost more than $700 million on Credit Suisse Group AG’s riskiest bonds purchased through the Japanese bank’s brokerage venture with Morgan Stanley, according to people familiar with the matter.
(Bloomberg) — Mitsubishi UFJ Financial Group Inc.’s wealthy clients lost more than $700 million on Credit Suisse Group AG’s riskiest bonds purchased through the Japanese bank’s brokerage venture with Morgan Stanley, according to people familiar with the matter.
Japan’s largest banking group is holding meetings of senior officials to look into the matter as it reaches out to roughly 1,500 clients who lost a combined 95 billion yen ($717 million), said the people, who asked not to be named discussing private information.
While MUFG is hardly the only firm to get caught up in the Credit Suisse debacle, the loss tally offers one of the first glimpses into how badly clients of a major investment bank were burned by the writedown. The Credit Suisse bonds, known as Additional Tier 1 notes, were purchased by customers from Mitsubishi UFJ Morgan Stanley Securities Co.
A spokesperson for the bank confirmed the losses.
Other Lenders
A representative for Mizuho Financial Group Inc.’s brokerage unit said its clients have lost more than 4 billion yen on Credit Suisse AT1s. Daiwa Securities Group Inc.’s client lost less than 1 billion yen on the instruments, according to a spokesperson.
A representative for Nomura Holdings Inc. said it hadn’t sold any of the Swiss lender’s AT1s in Japan. A spokesperson for SMBC Nikko Securities Inc. declined to comment.
MUFG is also checking that wealth managers at the brokerage – one of the two joint ventures between the Japanese institution and the Wall Street giant – appropriately explained to the buyers the risks associated with the debt, the spokesperson said.
The development illustrates how the fallout from Credit Suisse’s rescue by rival UBS Group AG and the resulting wipeout of about 16 billion Swiss francs ($18 billion) of its AT1 bonds is being felt across global finance. The deal to save the bank rendered the notes worthless, allowing Credit Suisse shareholders to recoup some value.
The AT1 notes were risky and designed to be written down in the event of Credit Suisse needing capital in a hurry. Some holders argue that they were treated unfairly and are looking for legal remedies.
Mitsubishi UFJ Morgan Stanley has been working to boost profit through wealth management services in Japan, where banks have been increasingly competing to manage a larger slice of the nation’s roughly 2 quadrillion yen in household financial assets.
“We are very sorry that we are causing our clients concern,” Mitsubishi UFJ Morgan Stanley said by email. “We will continue to offer thorough explanations to the customers who have been affected.”
–With assistance from Takako Taniguchi, Catherine Bosley, Ayai Tomisawa and Tom Metcalf.
(Adds losses at other Japanese firms in fifth paragraph)
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