Mitsubishi UFJ Financial Group Inc.
) reported net income of ¥255.2 billion ($2.6 billion) for fiscal
first-quarter 2014 (ended Jun 30, 2013), up from net income of
¥182.9 billion ($2.3 billion) in the year-ago period.
Results reflect a rise in G&A expenses and elevated credit
costs. Yet, the key positives for the quarter were growth in
deposits and loans along with a rise in net interest income and
fee revenues. Further, increased gross profits were a tailwind.
Performance in Detail
Gross profits for the quarter ended were ¥948.9 billion ($9.6
billion), up 1.8% year over year. Gross profits improved mainly
due to net fees and commissions, rise in income from sales and
trading, as well as elevated net interest income. These increases
were partially offset by reduced net gains on debt securities.
The period under review reflected a rise of 5.4% in net interest
income, which came in at ¥441.3 billion ($4.5 billion). The
year-over-year upsurge in net interest income reflects increased
loan income from the overseas business.
For Mitsubishi UFJ, trust fees along with net fees and
commissions totaled ¥295.7 billion ($3.0 billion), up 25.5% year
over year. However, net business profits stood at ¥382.3 billion
($3.9 billion), down 7.7% year over year.
The balance of securitized products and related investments as of
Jun 30, 2013 increased to ¥2.62 trillion ($0.03 trillion) in
total, an escalation of ¥0.18 trillion compared with the balance
of ¥2.44 trillion ($0.02 trillion) as of Mar 31, 2013. The
increase was mainly due to a rise in highly rated collateralized
debt obligations (CLOs) and commercial mortgages asset-backed
Mitsubishi UFJ reported total credit costs of ¥15.4 billion ($0.2
billion), which increased 4.1% year over year and includes losses
on loans written-off. The rise was mainly due to provision for
specific allowance for credit losses, partially offset by a dip
in losses on loan write-offs.
Net losses on equity securities were ¥12.8 billion ($0.1 billion)
compared with losses of ¥54.5 billion ($0.7 billion) in the
prior-year period. Gains were mainly due to a decline in the
losses on write-down of equity securities.
Other non-recurring gains were ¥1.2 billion ($0.01 billion)
compared with losses of ¥14.2 billion ($0.2 billion) recorded in
the prior-year period. G&A expenses climbed 9.4% year
over year to ¥566.5 billion ($5.7 billion), mainly due to higher
costs in overseas businesses.
As of Jun 30, 2013, Mitsubishi UFJ reported total loans of ¥92.9
trillion ($0.94 trillion), up from ¥91.3 trillion ($0.97
trillion) as of Mar 31, 2013. The increases were primarily due to
higher demand in overseas loans, partially offset by lower demand
in housing and domestic corporate loans. Moreover, deposits
climbed to ¥134.0 trillion ($1.4 trillion), up 1.7% sequentially,
mainly driven by higher individual and overseas and others
deposits, partially offset by lower corporate deposits.
Total assets stood at ¥234.1 trillion ($2.4 trillion), down
slightly on a year-over-year basis. Total net assets were ¥13.7
trillion ($0.1 trillion), up 1.5% sequentially. Net unrealized
gains on other securities declined to ¥990.2 billion ($9.98
billion), down 18% sequentially.
Mitsubishi UFJ Financial is targeting ¥760 billion ($7.9 billion)
of consolidated net income for the fiscal year ending Mar 31,
Going forward, we expect Mitsubishi UFJ's strong business model,
diversified product mix and higher gross profits to boost its
bottom line. Additionally, the company expanded its scope of
engaging in a global strategic alliance with
) into new geographies and businesses. This includes a loan
marketing joint venture that will provide clients in the United
States an opportunity to expand the world-class lending and
capital market services of both companies.
However, we are concerned about the heightening competition and
volatility in the Japanese economy.
Shares of Mitsubishi UFJ currently carry a Zacks Rank #2 (Buy).
Some other foreign banks that are worth considering include
BBVA Banco Franc
Sumitomo Mitsui Financial Group Inc.
) with a Zacks Rank #1 (Strong Buy).
BANCO FRANC-ADR (BFR): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis
MITSUBISHI-UFJ (MTU): Free Stock Analysis
SUMITOMO-MITSUI (SMFG): Free Stock Analysis
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