Among the chief executives of major banking companies in this country, Steve Cummings is a curious example.

He is in charge of MUFG’s operations across the Americas, but also not especially high in the global bureaucracy of the Japanese megabank.

He runs a U.S. holding company with just over $150 billion in assets, but his name is not as familiar across the industry as CEOs overseeing similarly sized operations (like Bruce Van Saun at Citizens Financial Group or Beth Mooney at KeyCorp).

Steve Cummings, CEO of MUFG Americas.
MUFG Americas CEO Steve Cummings is laying the groundwork for what is expected to be a major U.S. expansion for the world's fifth-largest bank holding company. David Yellen

Instead, as CEO of a foreign subsidiary, Cummings is shielded from the public scrutiny that comes with quarterly analyst calls and investor presentations.

“You are not the heart, you’re an appendage,” Cummings, the chief executive of MUFG Americas, said in an interview at his office, which has a view overlooking midtown Manhattan and memorabilia from the X-League, the American football league in Japan, on the walls.

“But I’ve gotten over that.”

What the industry misses in not watching Cummings closely is how he is laying the groundwork for what is expected to be a major U.S. expansion of MUFG, the biggest bank in Japan and the fifth largest in the world.

His parent company has been clear about its ambitions, stating publicly that it wants to be a top 10 bank in the United States. With Japan’s economy battling negative interest rates and a declining population, it needs new markets to grow.

It’s hard to see how MUFG will get there without a splashy acquisition, even if it increases lending and deposit-gathering at a steady pace. Its best-known business, its U.S. regional bank, which operates under the Union Bank brand on the West Coast, has just under $125 billion in assets, making it the 24th largest, according to the Federal Reserve.

To jump into the top 10 would mean nearly doubling in size, to over $200 billion in assets — a goal Cummings seems to take in stride.

“It would be natural to get to that scale,” he said.

’Thinking as if we’re a stand-alone company’

MUFG has a complicated structure, of which its regional bank is only part. There is an additional $35 billion in securities and leasing assets under the U.S. holding company. Cummings also is in charge of his parent company’s U.S. branches, which offer corporate and investment banking in a handful of major cities, such as New York and Los Angeles. In total, Cummings oversees about $350 billion in U.S. assets.

So he has a lot of moving parts to work with, which ultimately could be an advantage or a disadvantage for him as he tries to execute on his goal.

But growth ambitions aside, Cummings has a more immediate challenge: improving performance. On that front, he has a ways to go.

Profitability has been a drag. The efficiency ratio for the U.S. holding company has hovered in the mid-70% range over the past year, much higher than U.S. peers. Its margin also has lagged — staying around 2.30% last year — though a strategy of pushing into higher-yielding businesses, such as leveraged lending, is intended to help.

Since coming on board three years ago, Cummings has been focused on improving these metrics, even if his efforts have yet to materialize in the numbers in a big way.

He has reorganized the commercial banking division and trimmed staff. He also has encouraged cross-selling with commercial clients, and pushed the company into new areas of middle-market lending. In April the company plans to unveil a three-year plan to boost returns and increase revenue.

One of his biggest challenges, he said, has been changing the company’s mindset — getting its U.S. employees to feel less complacent operating in the shadow of their foreign parent, and without the scrutiny placed on publicly traded competitors. “We need to be thinking as if we’re a stand-alone company and taking ownership of what we do,” Cummings said.

MUFG broke from its longstanding practice in appointing Cummings to his role. Its parent company had previously relied on Japanese leadership for the U.S. division, rotating in senior executives from Tokyo for short stints in New York. It changed course in 2015, hiring Cummings, a UBS executive at the time, as its first American CEO.

In announcing his successor, the outgoing CEO, Masashi Oka, said at the time that having someone who is a native of this country would be key to deepening customer relationships, navigating U.S. regulations and guiding the transformation ahead.

Rita Sahu, an analyst at Moody’s, said the appointment of Cummings is telling. “To me, it just reinforced the importance of this as a market, in that they really wanted someone on the ground and entrenched.”

Cummings, 62, has a background that suits a company like MUFG well. He is a product of the golden age in U.S. banking — and its reverse during the financial crisis. He started in the industry in the late 1970s, working in investment banking and M&A advisory. In the early 2000s, during the rise of the financial conglomerate, he advanced to the top ranks of a regional bank that would later become Wachovia, a retail banking powerhouse. When the mortgage meltdown happened, he served as global head of corporate and investment banking during the Charlotte, N.C., company’s breathtaking collapse.

Cummings said he’s not undertaking a massive overhaul at MUFG, just looking for ways to improve efficiency. His goal is to create something sustainable — a locally managed U.S. company that is more profitable, and potentially much larger, than it was when he arrived.

He would like to demonstrate to the Japanese parent company that this business strategy is workable over the long term even after he retires.

“What I want as part of my legacy is for them to be in a position where that is a permanent view of how this business can be run,” Cummings said.

Why the U.S. matters so much

If you want to understand the business that Cummings runs, the first thing to know is that it’s a small — but increasingly important — piece of a much larger global enterprise.

MUFG Americas is part of the thicket of companies that operates under the umbrella of Mitsubishi UFJ Financial Group, a $2.6 trillion-asset global company. The Americas division is a wholly owned subsidiary of the Bank of Tokyo-Mitsubishi UFJ, the global parent’s best-known brand that also makes up the bulk of its net income.

MUFG Americas accounts for about 10% of the global parent’s annual profits. It is based in New York, but serves clients from Canada to Latin America. When factoring in the Bank of Tokyo operations in New York, Chicago and Los Angeles, U.S.-based businesses account for roughly 16% of the global parent's annual net income.

But with Japan facing an economic crisis, the Tokyo bank is turning to foreign markets, including the United States, as it looks for ways to grow.

After more than a decade of deflation, The Bank of Japan, the country’s central bank, in 2016 took the unusual step of adopting negative interest rates. The move charges banks a fee for storing their excess deposits, with the goal of encouraging lending and stimulating economic activity.

Japanese banks are “absurdly overdeposited,” said Alicia Ogawa, a director at the Center on Japanese Economy and Business at Columbia Business School.

Ultralow rates, in Japan and across the globe, have weighed on results. The return on equity at the global parent slumped to 7.25% in 2016, from nearly 9% five years earlier, according to its most recent annual report.

There are longer-term problems facing the Japanese economy as well. The country’s population is shrinking, having declined by about 1% as of the 2015 census, compared with five years earlier. Companies, in turn, are facing the prospect of declining demand.

“This is a crisis,” Cummings said, discussing the economic pressures. “It’s not a heart attack, but it’s a ‘you’re really sick and there’s no relief in sight.’ ”

One of the markets the Tokyo bank has targeted for growth is Southeast Asia. It announced in December that it planned to buy a majority stake in the Bank Danamon in Indonesia. Three years earlier, it bought Bank of Ayudhya in Thailand.

The United States is another promising target. The Tokyo bank gained a foothold in the U.S. banking industry during the 2008 financial crisis, when it acquired a 20% stake in Morgan Stanley. It also acquired UnionBanCal, now known as MUFG Union Bank, which has just over 350 West Coast branches.

Following the crisis, the U.S. division consolidated its operations — including its regional bank in California and securities division in New York — under a single holding company, MUFG Americas, to comply with a Federal Reserve requirement for foreign-owned banks. The requirement has helped to streamline the company’s U.S. operations, according to Cummings.

“I think it catches us up to more of a model that we are all accustomed to here in the U.S.,” he said of the holding company structure. “That’s how the other big guys do it.”

A plan to become more profitable

Asked about the Tokyo bank’s growth ambitions, Cummings said that U.S. acquisitions are a possibility.

“This is not a kind of wishful thinking,” he said. “We’ve got somebody who strategically needs to and wants to change the look of their business mix to a more global, more balanced model.”

In the meantime, though, Cummings is under pressure to boost returns and create a more solid foundation for that future growth. While it can take years to improve a big company’s financial health, meager results have nonetheless been a defining aspect of his tenure. “What’s been the challenge is profitability,” said Sahu, the Moody’s analyst. “There are a lot of moving parts there.”

Revenue at MUFG Americas has slid over the past year, falling by 1% during 2017 compared with the prior year. Profits, however, rose 8%, on lower tax expenses and credit costs.

Perhaps the biggest challenge facing the company, though, is its escalating expense base, which rose 5% last year from a year earlier. A big part of that uptick came from technology, as MUFG upgrades its core system and looks for new ways to automate manual tasks. “We’re on a financial path where we’re still not satisfied with where we’re at today,” said Johannes Worsoe, chief financial officer at MUFG Americas. The company in April intends to announce a three-year plan to “balance growth and returns,” he said.

Part of the plan involves boosting fee-based income, as MUFG makes a bigger push into the debt capital markets and looks to expand its portfolio of mortgage servicing rights.

Another part of the plan involves taking on additional credit risk. MUFG’s commercial banking business primarily serves high-end, investment-grade companies. But the U.S. division is starting to move into the somewhat riskier end of the middle market, with a bigger focus on asset-based finance and leveraged lending.

Offering unsecured consumer loans is also under consideration. MUFG currently purchases personal loans from fintech lenders like LendingClub, but it is developing its own product, according to Cummings. The product, which is “in deep planning stages,” could launch later this year.

“There’s so much left to do to better serve customers, and to monetize those relationships,” Cummings said.

Over the long term, MUFG also will need to lower its funding costs, according to Cummings. About two-thirds of the U.S. operations are funded with consumer and commercial deposits, but the remaining portion of the business is funded with swapping yen for dollars — a process that can get expensive, he said.

To that end, MUFG launched a direct consumer bank under the brand PurePoint last year. The division competes for online consumer deposits, offering high-yielding savings accounts similar to Ally Financial, Goldman Sachs’ Marcus and Synchrony Bank.

PurePoint, which also has storefronts in New York and a handful of other major markets, has about $3 billion in deposits so far.

Cummings declined to specify if the personal loan product that is in the works is for PurePoint.

Cultural differences

As he reflects on his three years at MUFG, Cummings, who spent the bulk of his career in North Carolina, projects an air of Southern gentility. He talks openly about MUFG’s financial challenges, while remaining deferential to his foreign parent. “I’ve felt nothing but complete support here,” he said.

Still, it’s clear that navigating two very different corporate cultures is a big aspect of Cummings’ role as MUFG’s first American CEO. In advocating for his part of the global company, he said he makes sure that executives in Japan feel comfortable with the changes he wants to make — and the fast pace at which he wants to move. “We’re pressuring them to move more quickly, which I would say they would agree is a good thing, and they’re pressuring us to give them more details,” Cummings said. “I actually think that ends up at a pretty nice middle ground.”

The two countries simply have different ways of doing business. Many Japanese companies, for instance, still operate under a system of lifetime employment, guaranteeing workers a job until they are old enough to retire. American companies, by contrast, have no qualms about laying off employees when needed.

Additionally, while Japanese companies pride themselves on perfection and meticulous planning, American companies prefer to move fast and have more tolerance for fixing mistakes later.

So it’s not surprising that, after just a few months on the job, Cummings raised eyebrows when he said he planned to reorganize MUFG’s U.S. commercial banking division.

Navigating two very different corporate cultures is a big aspect of Cummings’ role as MUFG’s first American CEO.

The reorganization, dubbed the “Trailblazer” project, consolidated a stand-alone middle-market division into MUFG Union Bank, with some positions getting eliminated. The idea was to foster a more collaborative approach — for instance, getting commercial bankers to refer the C-suite executives who are their clients to the bank’s wealth management team.

“When we go in and say, ‘We’re going to do the Trailblazer, and we’re going to lay off 100 fairly senior people as part of this,’ it’s, ‘Wow, are you sure you can do this? Isn’t it going to disrupt the entire business?’ ” Cummings said.

Asked whether he speaks Japanese, Cummings was blunt: “It would be nice if I did,” he said.

Still, he said the language barrier hasn’t been a big issue. Many of the Tokyo executives he works with speak English. Also, when he travels to Japan, he has a translator by his side.

“There is an element at the margin that doesn’t come out right, going both ways,” Cummings said, noting how some phrases get lost in translation. “So we have very experienced Japanese partners who are embedded with our team that make sure those communications are clear.”

The rebound after the crash

Unlike high-powered executives who claim they accidentally stumbled into success, Cummings has the resume of someone who seemed destined to become a bank CEO. He ran a boutique advisory firm at an early age, and quickly worked his way up the big-bank corporate ladder.

Still, the mortgage meltdown had Cummings questioning whether he was on the right career path at all.

Cummings got his start in the industry nearly four decades ago, accepting a job after business school at Kidder Peabody, the investment banking firm based in New York that, through a series of acquisitions, is now part of UBS. He worked in the corporate finance division in New York.

After his wife’s father passed away, however, she persuaded him to move to North Carolina. “She really wanted to go home, and I wanted to stay married,” Cummings said, with a laugh.

In 1984 Cummings joined Bowles Hollowell Conner, a boutique M&A advisory firm in Charlotte. The firm was founded by Erskine Bowles, a well-known figure in the Democratic Party. When Bowles was tapped by the Clinton administration in 1993 to serve as head of the Small Business Administration, he named Cummings — who was only 37 at the time — as CEO.

“He had a certain confidence about himself,” said Bowles, who later served as President Clinton’s chief of staff and, more recently, as lead director on Morgan Stanley’s board. “He had that judgment — you could see it from day one.”

It was a big test for Cummings. The economy was in a slump, recovering from the early 1990s recession. After relying for years on Bowles to generate a pipeline of business, the firm had to forge a path forward without him.

“I had this moment of truth, of ‘holy smokes,’ ” Cummings said. “I knew I was young, and the firm was only 35 people. But will they follow me?”

Cummings said he made it clear to everyone that, in order to make the firm successful, they had to “grab a shovel.” Everyone had to know their role, had to be disciplined about their assignments and had to be held accountable. Eventually the firm found its footing.

“That was a real learning moment for me,” he said.

By the late 1990s, when financial conglomerates came on the scene, big banks began scooping up small brokerage and advisory firms. Seeing an opportunity in the market — and recognizing that Bowles Hollowell had had a good run — he oversaw a sale in 1998 to First Union, a fast-growing regional bank. As part of the deal, he agreed to stay on for a few years.

“I thought I would do my time and then go,” Cummings said. “But they just started asking me to do more things.”

Cummings thrived in the world of megabanking. First Union acquired Wachovia several years later and adopted its name. The company began to grow ambitiously, in part by building out its investment bank and advisory division, a business that Cummings was tapped to lead.

Wachovia’s success took a turn several years later when the subprime mortgage crisis began to ripple through the economy. Cummings’ memories from the time are still raw.

He recalled the exact moment, in early 2007, when he and his colleagues spotted cracks in the commercial mortgage-backed securities business and began to pull back. Soon after that, his division began taking heat for losses that had surfaced in Wachovia’s investment bank.

But “the anchor that could not be dealt with,” Cummings said, was the company’s ill-fated acquisition, in 2006, of Golden West Financial in California, a provider of pick-a-pay mortgages, which allowed borrowers to pay less interest than what was due.

By the fall of 2008, Wachovia, which had more than $800 billion in assets, was on the brink of collapsing. Wells Fargo hustled through an emergency deal to buy the company, with the closing just over a year later. Cummings was one of several senior executives who were not asked to join the San Francisco megabank. “The original dream for Wachovia was to move to California and somehow do a deal with Wells,” Cummings said. “So we did that in a backwards way.”

After the sale, Cummings, who was 53 at the time, stepped away from the industry. He took time to think about the possibility of a radically different career path. He described the first months after the crash as a period of recovery. “It really was devastating for me,” Cummings said. “I had to think through where I was.”

He considered doing some investing and joining a board. But it didn’t take long for him to recognize that, as he said, his “engine was still running,” and that banking was where he belonged. About 18 months after he left Wachovia, Cummings began looking for his next opportunity in investment banking, recognizing that he would have to leave Charlotte for New York to find it.

Cummings was hired by UBS in 2011. As chairman of the U.S. investment bank in New York, he was put in charge of restructuring the division, which was struggling after the crisis. Doing so involved slashing the loan book and moving to a “capital-light structure,” he said. The experience taught him how to oversee a corporate turnaround.

Four years later, when he was offered his current role at MUFG, he knew that he was up for the challenge.

“What an opportunity to have another chapter,” Cummings said. “This was not, ‘Fix something that’s broke.’ It’s, ‘Tune it, make it better, and help take it to the next level.’ ”

Looking ahead

While Cummings may be close to the end of his career, he insists that he has no plans to retire anytime soon.

His six children are fully grown, with the youngest having just graduated from college. (None of them have followed him into banking, though one of his sons works in a boutique advisory firm on the West Coast.) His wife and dogs still live in Charlotte and, though he travels frequently for work, he visits them as often as possible.

It remains to be seen what kind of legacy Cummings will ultimately leave behind at MUFG. Beyond MUFG’s disappointing financial performance, brand recognition may be its biggest challenge. Executives are quick to note that MUFG is not well-known in the United States, despite its large size and high-profile commercial clientele. Its complicated structure and multiple retail brands make it somewhat inscrutable to consumers.

MUFG also has attracted some controversy over the past year, amid a legal battle between the Bank of Tokyo Mitsubishi UFJ and the New York State Department of Financial Services.

The Tokyo bank last year won approval to flip its state-regulated U.S. branches to a national charter. Its primary New York branch, however, had been fined by the state regulator in 2013 and 2014 for improperly handling transactions to sanctioned countries. After receiving approval for federal oversight, the bank sued the New York financial regulator to halt state oversight of the branch.

The DFS, which is run by Superintendent Maria Vullo, is challenging the suit. MUFG, meanwhile, has said it makes financial sense to consolidate its subsidiaries under a single regulator.

Whether Cummings will succeed in getting MUFG into better financial shape overall — bank acquisition or not — is an open question. But MUFG is busy making moves on multiple fronts, and Cummings is orchestrating them all with quiet confidence.

“He is the CEO of the Americas operations of one of the biggest and oldest banks in the world, which wants to make investments in businesses, clients and acquisitions,” said Ogawa, the Columbia professor. “He’s a very powerful guy in that respect."

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