Japan's MUFG Bank to book $1.9 billion hit after Indonesian unit's stock plunge

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TOKYO (Reuters) – The banking unit of Japan’s Mitsubishi UFJ Financial Group Inc (MUFG) (T:) on Monday said it would book a one-off charge of about 207.4 billion yen ($1.9 billion) for the quarter ended Dec. 31 due to a drop in the share price of an Indonesian subsidiary.

PT Bank Danamon Indonesia Tbk (JK:), of which MUFG Bank Ltd owns 94.1%, closed at 3,950 rupiah on Monday on the Indonesia Stock Exchange’s last trading day of 2019.

Under accounting rules, if Danamon’s shares close below 50% of the average price MUFG paid for its stake, the Japanese bank is required to reassess the value of the holding and book a one-time charge.

MUFG does not disclose the price level where it would be required to book an extraordinary charge. It has built up its stake through a series of acquisitions since 2017. In April it more than doubled its holding to 94% from 40%, paying 9,590 rupiah a share, according to a filing.

But shares of Bank Danamon have tumbled since and this month hit their lowest in nearly three years, at 3,640 rupiah. The shares are down by nearly half this year, and were hit particularly hard in May after index provider MSCI removed the bank from its Global Standard index due to low liquidity.

Exclusion from a benchmark index usually triggers selling by passive funds that track the index.

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