Morgan Stanley and Mitsubishi UFJ Financial Group plan to widen their alliance over the next decade to target foreign exchange trading and Japanese research and equity businesses for institutional clients, to build on their 15-year partnership.
MUFG and Morgan Stanley outlined an enhanced strategic partnership on Tuesday dubbed "Alliance 2.0", which builds on the collaboration they have had since 2008 when the Japanese bank pumped US$9bn into Morgan Stanley. Since then, the firms have collaborated in global investment banking and have Japan securities joint venture businesses.
MUFG still owns 22.6% of the US investment bank, worth US$32.5bn at current prices. It is one of the most successful investments of the series of rescue deals during the 2008 financial crisis.
The two banks said they aim to implement collaboration in FX and Japanese research and equity businesses in the first half of 2024. They said it is part of their goal to become the top securities firm in Japan.
"These initiatives are significant, not only in terms of providing better services to our clients but also as examples of ways our two firms can continue to work together and deepen our strategic alliance over the years to come," said James Gorman, CEO of Morgan Stanley.
The banks said competition in FX markets has intensified in recent years due to the electronification of trading and with new entrants driving technology innovation, and big firms have tried to scale up by expanding and diversifying their customer bases and increasing technology investment.
As a result, they want to pull together MUFG's trading relationships with Japanese and global corporate clients and Morgan Stanley's trading relationships with global institutional and corporate clients, and use the US bank's FX business platform. The FX sales businesses will continue to be operated by each firm independently.
In Japan research and equities, the banks plan to integrate the Japan equity research, institutional sales, corporate access and part of execution services functions of both of the JV businesses that were formed in May 2010 – Mitsubishi UFJ Morgan Stanley Securities (MUMSS) and Morgan Stanley MUFG Securities (MSMS). They will be integrated into MSMS.
Since the JVs were set up, the two banks have collaborated in areas such as M&A advisory and equity and debt underwriting, and wealth management. The banks said combining MUMSS' broad Japan equity coverage and domestic client relationships with MSMS' global operating platform and international client relationships will better serve demand for Japan equity products.
Morgan Stanley is due to report second-quarter results later on Tuesday.