MUFG buys RBS project finance book

BANK of Tokyo-Mitsubishi UFJ said yesterday it had agreed to buy a project finance loan book owned by Royal Bank of Scotland (RBS) for £3.8bn.

Earlier this month City A.M. reported RBS had entered into talks with the subsidiary of Japan’s Mitsubishi UFJ (MUFG) Financial Group over the possible sale of the book which includes loans for the M25 motorway and a gas pipeline between Russia and Germany.

The sale is intended to boost the 84 per cent taxpayer owned bank’s balance sheet while also meeting European Union demands to sell assets.

The proposal would include a transfer of employees, MUFG said, adding the deal is expected to be finalised by the end of the year, subject to regulatory approval.

If completed, the deal would be one of the biggest acquisitions for MUFG since it paid $9bn for a 21 per cent stake in US bank Morgan Stanley at the height of the financial crisis.

RBS, led by chief executive Stephen Hester, has been shedding non-core assets over the past year including the sale of 300 branches to Santander during the summer.

Besides a loan RBS extended last year for the widening of London’s M25 orbital motorway, the portfolio includes financing for a pipeline that will ship 55bn cubic metres of Russian gas to Germany and the European Union in 2011 and 2012.

Just last week RBS announced pre-tax losses of £1.38bn for the three months to the end of September saying market conditions remained challenging.

Hester said the bank was making “good progress” in its recovery, but warned highly volatile accounting charges could “obscure our underlying story”. Since October 2008, the bank has announced 23,000 job losses worldwide.