UnionBanCal Is Worth $8.3 Billion, Experts Say

UnionBanCal Corp., which owns the third-largest bank in California, could fetch as much as $8.3 billion if its Japanese owner, Bank of Tokyo-Mitsubishi Ltd., puts it up for sale, investment bankers and analysts said.

That’s equal to $150 a share, or about 21 times estimated 1998 earnings and more than triple book value. Though high by historical standards, that’s in line with recent bank acquisitions in the United States. This month, for example, National City Corp. agreed to buy First of America Bank Corp. for $7.1 billion, or 3.84 times book and 22.8 times earnings.

Bank of Tokyo-Mitsubishi, the world’s largest bank, has no plans to sell its 81% stake in UBC, said spokesman Norihiko Kato. Yet that hasn’t deterred speculation that UBC, which owns San Francisco-based Union Bank of California, is on the block.

UBC shares surged last week after another Japanese bank, Sumitomo Bank Ltd., said it was exploring the sale of its California subsidiary. UBC’s stock, which gained 13% since the Sumitomo announcement, was unchanged at 103 in late trading.

“The price should be high given the attractive nature of the franchise, but it won’t approach the level of some recent deals,” said John Duffy of Keefe, Bruyette & Woods Inc., an investment bank specializing in financial institutions.

Analysts and investment bankers described UBC as the crown jewel of Japanese-controlled financial institutions in California. The bank, with $31 billion in assets and more than 230 California offices stretching from San Diego to Sacramento, is six times larger than Sumitomo Bank of California.

Japanese banks are struggling to cope with a mountain of bad debt left over from speculative real estate lending during the “bubble economy” of the late 1980s. They could use the proceeds from the sale of U.S. assets to replenish their dwindling capital. At least 15 of Japan’s 19 nationwide banks recently disclosed plans to shut or merge foreign operations.