Mitsubishi UFJ Financial Group Inc.
) reported net income of ¥532.5 billion ($6.7 billion) for nine
months ended fiscal 2013 (Dec 31, 2012) versus net income of
¥815.8 billion ($10.4 billion) in the year-ago period. Net income
per common stock was ¥36.94 (46 cents) versus ¥56.92 (72 cents)
in the prior-year period.
Notably, prior-year results include the one-time effect of
negative goodwill related to the application of equity method
accounting on investments in
Results reflect a rise in G&A expenses and decline in net
interest income. Moreover, elevated credit costs were a negative
for the quarter. Yet, the key positives for the quarter were
growth in deposits and loans. Increased gross profits remained a
Performance in Detail
Gross profits for the nine months were ¥2,678.1 billion ($33.5
billion), up ¥31.4 billion ($0.4 billion), or 1.2% from ¥2,646.6
billion ($33.6 billion) reported in the comparable prior-year
period. Gross profits improved mainly due to rise in income from
sales and trading coupled with net gains on debt securities.
The period under review reflected a decline of ¥68.2 billion
($0.9 billion) in net interest income, which came in at ¥1,309.8
billion ($16.4 billion). The year-over-year decline in net
interest income reflects tighter domestic deposit-loan margin,
reduced interest income in Global Markets segment and low
consumer-finance income. These declines were partially offset by
an upsurge in loan income from overseas business.
For Mitsubishi UFJ, trust fees along with net fees and
commissions totaled ¥784.2 billion ($9.8 billion) compared with
¥769.9 billion ($9.8 billion) as of Dec 31, 2011. Net business
profits stood at ¥1,154.1 billion ($14.4 billion), down ¥19.2
billion ($0.24 billion) or 1.6% from ¥1,173.3 billion ($14.9
billion) in the prior-year period.
The balance of securitized products and related investments as of
Dec 2012 increased to ¥2.13 trillion ($0.02 trillion) in total,
an escalation of ¥0.48 trillion ($0.01 trillion) compared with
the balance of ¥1.66 trillion ($0.02 trillion) as of Mar 2012.
The increase was mainly due to a rise in highly rated
collateralized debt obligations (CLOs) and commercial mortgages
asset-backed securities (CMBS).
Mitsubishi UFJ reported total credit costs of ¥103.5 billion
($1.3 billion), which increased 14.1% from ¥90.7 billion ($1.2
billion) in the year-ago period. The upsurge was mainly due to a
lower reversal of provision for general allowance for credit
losses, partially mitigated by a decline in losses on loans
Net losses on equity securities were ¥90.9 billion ($1.1
billion), down from ¥155.0 billion ($2.0 billion) in the
prior-year period, mainly due to decline in the losses on
write-down of equity securities.
For the quarter, other non-recurring losses were ¥23.2 billion
($0.3 billion) compared with gains of ¥303.9 billion ($3.9
billion) recorded in the comparable prior-year period. G&A
expenses climbed ¥50.6 billion ($0.6 billion), or 3.4% year over
year to ¥1,154.1 billion ($14.4 billion), due to elevated costs
in overseas business.
As of Dec 31, 2012, Mitsubishi UFJ reported total loans of ¥87.1
trillion ($1.0 trillion), up from ¥84.6 trillion ($1.0 trillion)
as of Mar 31, 2012 and from ¥84.8 trillion ($1.1 trillion) as of
Sep 30, 2012. These increases were primarily due to higher demand
in domestic corporate loans and overseas loans.
Moreover, deposits climbed to ¥126.9 trillion ($1.5 trillion)
from ¥124.8 trillion ($1.5 trillion) as of Mar 31, 2012 and from
¥125.1 trillion ($1.6 trillion) as of Sep 30, 2012, mainly due to
an increase in individual, overseas and others deposits.
Total net assets were ¥12.3 trillion ($0.14 trillion), up from
¥11.7 trillion ($0.14 trillion) as of Mar 31, 2012 and from ¥11.9
trillion ($0.15 trillion) as of Sep 30, 2012.
Net unrealized gains on securities available for sale surged to
¥1.0 trillion ($0.01 trillion), from ¥832.0 billion ($10.1
billion) as of Mar 31, 2012 and from ¥699.6 billion ($9.0
billion) as of Sep 30, 2012. These increases were aided by higher
unrealized gains on domestic equity securities.
Mitsubishi UFJ Financial is targeting ¥670 billion ($7.5 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 Morgan Stanley 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).
Among other foreign banks,
Credit Suisse Group
) carry a Zacks Rank #2 (Buy).
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