Mitsubishi UFJ Financial Group Inc.
) reported net income of ¥530.2 billion ($5.4 billion) for the
first-half of fiscal 2014 (ended Sep 30, 2013), up from net
income of ¥290.4 billion ($3.7 billion) in the year-ago period.
The key positives for the period under review were growth in
deposits and loans along with a rise in net interest income and
fee revenues. Further, increased gross profits were a tailwind.
Yet, results reflect a rise in G&A expenses depicting
undisciplined expense management.
Performance in Detail
Gross profits for the quarter ended were ¥1,845.2 billion ($18.6
billion), up 0.7% year over year. Gross profits improved mainly
due to higher net fees and commissions, rise in income from sales
and trading, as well as elevated overseas net interest income.
These increases were partially offset by reduced net gains on
The period under review reflected a rise of 3.7% in net interest
income, which came in at ¥908.6 billion ($9.2 billion). For
Mitsubishi UFJ, trust fees along with net fees and commissions
totaled ¥618.1 billion ($6.2 billion), up 19.2% year over year.
However, net business profits stood at ¥725.0 billion ($7.3
billion), down 11.3% year over year.
The balance of securitized products and related investments as of
Sep 30, 2013 increased to ¥2.61 trillion ($0.027 trillion) in
total, an escalation of ¥0.17 trillion compared with the balance
of ¥2.44 trillion ($0.026 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's total credit costs amounted to a net reversal of
¥25.7 billion ($0.3 billion) by recording reversal of provision
for general allowance for credit losses. The company recorded
costs of $62.2 billion ($0.8 billion) in the prior-year period.
Net gains on equity securities were ¥43.4 billion ($0.4 billion)
compared with losses of ¥173.5 billion ($2.2 billion) in the
prior-year period. Gains were mainly due to an increase in gains
on sales of equity securities and reduced losses on write-down of
Other non-recurring losses were ¥12.4 billion ($0.13 billion)
compared with ¥38.7 billion ($0.49 billion) recorded in the
prior-year period. G&A expenses climbed 10.4% year over
year to ¥1,120.2 billion ($11.3 billion), mainly due to higher
costs in overseas businesses.
As of Sep 30, 2013, Mitsubishi UFJ reported total loans of ¥95.3
trillion ($0.97 trillion), up from ¥91.4 trillion ($0.97
trillion) as of Mar 31, 2013. The increases were primarily due to
higher demand in overseas and domestic corporate loans, partially
offset by lower demand in housing loans.
Moreover, deposits climbed to ¥136.1 trillion ($1.38 trillion),
up from ¥131.7 trillion ($1.40 trillion) as of Mar 31, 2013,
mainly driven by higher individual and overseas deposits.
Total assets stood at ¥242.2 trillion ($2.46 trillion), up from
¥234.5 trillion ($2.49 trillion) as of Mar 31, 2013. Total net
assets were ¥14.3 trillion ($0.15 trillion), up from ¥13.5
trillion ($0.14 trillion) as of Mar 31, 2013. Net unrealized
gains on other securities declined to ¥1.8 trillion ($0.018
billion), down from ¥1.9 trillion ($0.02 trillion) as of Mar 31,
As of Sep 30, 2013, Common Equity Tier 1 capital ratio stood at
11.77%, slightly up from 11.70% as of Mar 31, 2013. Tier 1
Capital ratio was 13.12%, as compared with 12.74% as of Mar 31,
2013. Total Capital ratio was 16.84% compared with 16.68%
as of Mar 31, 2013.
Mitsubishi UFJ Financial revised the target upward to ¥910
billion ($9.37billion) of consolidated net income for the fiscal
year ending Mar 31, 2014, reflecting strong performance of the
interim results of the company's subsidiaries.
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 #3 (Hold).
Some better performing foreign banks include
Westpac Banking Corporation
) with a Zacks Rank #1 (Strong Buy) and
Itau Unibanco Holding S.A.
) with a Zacks Rank #2 (Buy).
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