UnionBanCal has announced that it will receive a $2 billion capital contribution from its parent company, The Bank of Tokyo-Mitsubishi UFJ, (BTMU), by September 30, 2009.
Reportedly, the capital will have a positive impact on all of the capital ratios of UnionBanCal and its primary commercial banking subsidiary, Union Bank. On a pro forma basis, reflecting the $2 billion capital contribution, tangible common equity would increase 43% to $6.7 billion, the tangible common equity ratio would increase by 2.55% to 9.11%, and the Tier 1 common ratio would increase by 3.21%, to 11.87%, as of June 30, 2009.
Masaaki Tanaka, president and CEO of Union Bank, said: “The $2 billion capital contribution is designed to provide UnionBanCal with sufficient capital now to offset potential future credit losses, assuming a highly adverse economic scenario. The highly adverse scenario is significantly more pessimistic than that which is incorporated into our base financial forecast, and was based on the Federal Reserve’s publicly available Supervisory Capital Assessment Program (SCAP) assumptions. To the extent actual credit costs are consistent with, or lower than, those in our base forecast, we will have considerable excess capital that could be deployed to support incremental organic growth and acquisitions.”
“The capital contribution is a voluntary and preemptive action by BTMU, made at our request, to ensure that all key constituents, including customers, counterparties, bank regulators, credit rating agencies, and employees, continue to view UnionBanCal as one of the financially strongest financial institutions in the US. By injecting the capital preemptively, BTMU has reaffirmed its commitment to capital strength at UnionBanCal, as well as UnionBanCal’s strategic importance within the global BTMU organization,” he added.
