By Kentaro Otsuka and Shinichi Ikeda / Yomiuri Shimbun Staff Writers

MUFG Bank Ltd. opened a new branch on Sept. 12 for the first time since its formation about 20 years ago. The branch, called M-tto Square, is a new type of outlet for individual customers and is located in front of JR Takanawa Gateway Station in Minato Ward, Tokyo.

"In the retail (personal banking) business, our stance is to swiftly change strategy in response to shifts in customer needs," said Junichi Hanzawa, president and CEO of the bank, in a recent interview with The Yomiuri Shimbun, speaking on the bank's strategy amid a "life with interest rates" in Japan.

Hanzawa, who was involved in negotiations for the merger that resulted in the establishment of Mitsubishi UFJ Financial Group Inc. $(MUFG)$ in 2005 as a mid-level employee, also reflected on the last two decades.

The following is excerpted from the interview. 

The Yomiuri Shimbun: Your bank pursued branch reductions in the late 2010s. What is your strategy related to branches amid rising interest rates?

Junichi Hanzawa: The environment surrounding banks changes daily, and customer needs shift in the blink of an eye. Such changes can be grasped best on the front lines of the business. After taking office as president, I have visited branches at a pace of two per month, totaling about 100 branches so far. The most significant environmental changes seem to be (rising) interest rates, (changes in) regulations, digitalization and technological innovation represented by AI.

In terms of customer interaction, the prolonged period of ultra-low interest rates led to the promotion of efficiency improvement initiatives at staffed branches, while digitalization has strengthened the provision of non-face-to-face services. M-tto (the bank's new service brand) is an initiative to strengthen both non-face-to-face and face-to-face (in-branch) services.

For non-face-to-face services, we integrate and offer not only banking products but also products provided by the group (such as credit cards and securities). For face-to-face services, we add value by providing services on complex administrative tasks and asset management consultations.

Yomiuri: So you've reaffirmed the value of branches? 

Hanzawa: We certainly feel that we have. While tasks like money transfers or balance checks can be handled digitally, matters like inheritance involve highly complex procedures, requiring professionals to properly explain details to customers either in person at a branch or remotely. We want our branches to reliably handle what cannot be resolved (by a customer) online.

Yomiuri: During merger talks between Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. 20 years ago, preserving each bank's strengths must have been a major challenge.

Hanzawa: At the time, I was deputy manager at the planning department (at the Bank of Tokyo-Mitsubishi Ltd.). The fundamental policy (in merger talks) was to create a world-class integrated financial group capable of winning against global competition and providing customers with the highest standard of products and services. Of course, in negotiations, not all opinions align immediately. When disagreements arose, both the top management and my level of management seemed to have the mindset of reflecting on the fundamental policy to decide how to proceed.

Both we and UFJ Holdings already had experience of merger negotiations. Rather than overly fixating on our respective banks' methods, I believe there was a mindset among both sides of incorporating the good points they lacked that the other side possessed.

Yomiuri: What were the strengths of UFJ Holdings? 

Hanzawa: In terms of group-wide initiatives, I felt UFJ was more advanced.

Our (the Mitsubishi Tokyo Financial Group side's) internal collaboration was primarily driven by (the Bank of Tokyo-Mitsubishi) and Mitsubishi Trust and Banking Corp., and our group's structure had been formed while preserving the strengths of our individual entities (the bank, for example), which were very powerful. I had the impression that because UFJ Holdings had more direct authority, its group was more integrated.

Yomiuri: As part of MUFG's group integration initiatives, it was decided in 2017 that Mitsubishi UFJ Trust and Banking Corp.'s loan-related operations would be consolidated into what is now called MUFG Bank.

Hanzawa: Originally, our group was structured like a child giving birth to the parent (MUFG), where the aim was to enhance the group's competitiveness by leveraging the strengths of each entity (child). However, overlapping lending operations within the group created inefficiencies, and we received inquiries from customers, asking, "Why are interest rates different within the same group?"

Facing the harsh environment of the negative interest rate policy, the group had to unite, eliminate duplication and demonstrate competitiveness to overcome the situation.

Although the bank and trust bank both had personnel handling the same client (company to which loans had been provided), the responsibility for that task was moved entirely to the bank. We thought the trust bank would not accept the change unless we established a system (at the bank) capable of providing clients with value-added services.

We also transformed a performance evaluation system (used at the bank) to be integral to the group as a whole. Under the system, sales of products from anywhere within the group, not just the bank's own products, could be evaluated.

Even so, for the trust bank, the decision was a major one. To show respect (to the trust bank) for accepting that decision, we kept it in mind that group integration initiatives must be thoroughly carried out. The trust bank temporarily saw a drop in profits due to the transfer of lending operations, but now generates greater profits, and the competitiveness of its investment management and asset management businesses has significantly increased.

Yomiuri: The group's investment in Morgan Stanley enhanced its profitability. What role does Morgan Stanley play?

Hanzawa: Before we invested in Morgan Stanley, strengthening our investment banking operations was one of the main challenges we had to address. Building it internally would have been difficult, so we explored other options, including acquisitions -- we actually compiled a list of candidates. Because we had a strategy at that time to invest (in somewhere), it didn't take long for the decision to be made (in 2008).

We had a securities firm under the MUFG umbrella, but it was lagging significantly behind Japan's top four securities firms (like Nomura Securities Co.) at the time. To strengthen global investment banking operations, investing in or acquiring a firm (like a U.S. securities firm) was the most viable option.

After the investment, we were able to strengthen our domestic and international investment banking operations and collaboratively built a robust wealth management business for high-net-worth individuals. For us, it is extremely valuable that we could discuss with Morgan Stanley areas where we lack sufficient competitiveness.

Yomiuri: Twenty years after the merger, you've maintained your position as the top bank (in Japan). What is your strategy for future growth? 

Hanzawa: We've analyzed the changes in our surrounding environment, formulated growth strategies with a medium-to-long-term perspective and put them into action. Since resources are constrained, we've prioritized where to allocate them, considering whether to do it by ourselves or through investment or acquisitions, whether it would be done domestically or overseas, and advanced step by step. Looking back over these 20 years, I believe this approach has contributed significantly. 

It's only natural that things don't always go as initially planned, so we make course corrections when they diverge. We've constantly felt the pressure to prove our worth, which is why we've kept running. We must continue running or we'll fall behind competitors and fail to meet our customers' ever-changing needs.

Especially with the return of a "life with interest rates," whether we can strengthen our retail business foundation will be crucial for future growth as a financial group. As digitalization advances even in Asia, another key factor will be whether we can enhance our overall competitiveness, including everything from traditional commercial banking to digital services.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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October 09, 2025 03:45 ET (07:45 GMT)

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