SINGAPORE - Fitch Ratings said Mitsubishi UFJ Financial Group's US$706 million investment in ride-sharing firm Grab shows growing interest by Japanese banks to expand in South-east Asia and upgrade their technology capabilities.
Back home, Japanese banks face challenges in generating revenue in a climate of persistently low domestic interest rates and high competition. Thus, one approach to growth is expansion into faster-growing markets. However, this strategy may lead to higher costs, including credit and regulatory-related compliance costs which can place pressure on profitability, Fitch said.
One example is MUFG's writing down goodwill on its Bank Danamon investment in Indonesia. MUFG had increased its controlling stake in the Indonesian bank in 2019.