Sparked by Mitsubishi UFJ Financial Group's deal last week to buy UnionBanCal Corp., industry observers are watching to see if the early stages of a trend involving more foreign banks' investing in the United States finally emerges.

Though the Japanese company's situation is unique — it already owned 65% of UnionBanCal — analysts said the deal may signal a broader interest among Asian and, potentially, a few European companies in pursuing growth here this year and next.

So far signs of that kind of interest have been elusive — this despite a persistently weak dollar that many had thought would serve as a catalyst for companies in nations with relatively strong currencies.

Whether a recent rally in the dollar will persuade some potential buyers to dip back in before the window of currency opportunity closes is, of course, a question complicated by myriad doubts about U.S. asset quality, but some do see the exchange rate equation right now as favoring a more active M&A market.

"I do think we're seeing a pickup in M&A that will continue to build momentum," Mark Fitzgibbon, the head of research at Sandler O'Neill & Partners LP, said in an interview Monday. "Logically, with the dollar still relatively weak against other currencies, more foreign banks should be taking a hard look" at the United States.

In addition to several Asian companies, Barclays PLC in London and the Spanish companies Banco Bilbao Vizcaya Argentaria SA and Banco Santander Central Hispano SA are on the short list of European banks with the wherewithal and interest to buy in the United States. These companies said they do not comment on deal discussions.

Though they have yet to make a move, Mr. Fitzgibbon said he views Chinese banks "as a wild card" because, riding a wave of prosperity at home, they have the capital strength to make big buys in the United States.

Speculation is mounting that troubled West Coast thrift companies Downey Financial Corp. in Newport Beach, Calif., and Washington Mutual Inc. in Seattle would at least consider talks with a foreign buyer. They are viewed by some analysts as possible targets of European banks for their entrée to coveted West Coast retail markets.

Downey, after posting a steep second-quarter loss on mounting mortgage troubles, said this month that it is pursuing "strategic alternatives," a term typically used by a company that is considering a sale. Downey declined interview requests.

Wamu, meanwhile, maintains that it is well-capitalized after raising $7 billion in April, and it is pursuing recovery as a stand-alone company. But after three consecutive quarterly losses, Wamu must either return to profitability soon or risk eating through its capital cushion by next year, analysts say. This possibility, at a minimum, makes Wamu a potential takeover target, observers say.

Some nibbling is taking place in the financial services space. Japan's Mizuho Corporate Bank invested $1.2 billion in Merrill Lynch & Co. Inc. in January, and Tokio Marine Holdings Inc. last month said it had agreed to buy the insurer Philadelphia Consolidated Holding Corp. for about $4.7 billion. Korea Development Bank, while seeking to quash rumors it is pursuing an outright acquisition, confirmed Friday that it is interested in buying a stake in Lehman Brothers Holding Corp.

Lehman is struggling under the weight of mortgage-related losses and needs either a big cash infusion or a buyer, analysts said. With management seemingly "unwilling to sell out at a deeply distressed value," Ladenburg Thalmann & Co. Inc. analyst Richard Bove wrote in a research note last week, "the stage is set for a hostile bid to take over the whole company."

Certainly, many European banking companies are grappling with the same credit issues dogging their U.S. rivals. "A lot of these guys have their own problems," said Anthony Davis, a Stifel, Nicolaus & Co. analyst. "They don't want to buy somebody else's."

But foreign buyers have an opening now because there is so little competition from U.S. banks. "For most U.S. banks, there's too much risk, too much downside right now," Gary Gordon, a Portales Partners LLC analyst, said in an interview Monday.

The domestic companies that top most analysts' lists of buyers capable of taking on a big deal — JPMorgan Chase & Co., Bank of America Corp., U.S. Bancorp, and Wells Fargo & Co. — either have their hands full integrating previous deals or have said they simply are not interested.

JPMorgan Chase is absorbing Bear Stearns Cos., and B of A is doing the same with Countrywide Financial Corp. U.S. Bancorp chief financial officer Andrew Cecere said in an interview last month that his company is focused on organic growth and, possibly, small deals. Wells executives, who announced this month the completion of a deal for the $1.4 billion-asset Century Bancshares Inc. of Dallas , have repeatedly said they are content to do fill-in purchases and uninterested in what finance chief Howard Atkins has called large "fixer-uppers."

When it comes to a troubled-bank buy, Stifel Nicolaus' Mr. Davis said, any big U.S. acquirer would probably wait on the sidelines to see whether federal regulators approach them to play the role of savior — at a steep discount — much as JPMorgan Chase did in buying Bear Stearns. "I think, if you see deals this year and into next, the big focus will be on regulatory-assisted" transactions, he said.

Wells' stance, analysts say, punctuates the sector's risk aversion even as equity prices have plummeted, weakening would-be sellers, which find themselves unable to make unusual demands.

"The buyers here know the credit problems that a seller probably has are still going to get worse, and they don't want to buy when they aren't sure what it is they are getting," David Hendler, a CreditSights Inc. analyst, said in an interview Friday. "Some of these companies that might sell: With mortgages, they went to such excess that the adjustment has to be long and painful. That's a big problem for buyers."

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