MUFG’s $9 billion into Morgan Stanley at the depth of the crisis (2008)

Buying time as an asset at the bottom of the crisis

The heart of this decision is that, in a market where fear sets the price, MUFG deliberately chose to be the buyer. In the days after Lehman collapsed, while financial institutions worldwide were shrinking to protect their capital, MUFG drew on the depth of deposits it had won through merger and put $9 billion into the sinking number-two US securities house. Recasting the deal from common to preferred stock as the share price fell, and capping the downside with a 10% annual dividend, the negotiation carried the calculation of a rescue that never let go of hard commercial advantage. Behind the flourish of the anecdote — a check handed over on a public holiday — the terms were struck with cold precision.

It took time for the verdict to settle. In the year of the investment — the fiscal year ended March 2009 — MUFG booked its first loss since its formation, and in the near term the weight of the crisis showed through instead. The tide turned only some years later. Morgan Stanley came through the crisis to return as a leading player in the capital markets, and the profit of a firm that became an equity-method affiliate in 2011 grew into one of the pillars supporting MUFG’s overseas earnings thereafter. A bank whose room to grow at home was thinning recovered, over a span of ten years, the time it had bought in the American investment bank at the bottom of the crisis. The single check written in the midst of the panic was, seen in hindsight, a disciplined bet.