Mitsubishi UFJ Financial Group Inc.
) reported net income of ¥290.5 billion ($3.7 billion) for six
months ended fiscal 2013 (ending on September 30, 2012) versus
net income of ¥696.1 billion ($9.0 billion) in the year-ago
period. Net income per common stock was ¥19.84 (25 cents) versus
¥48.51 (63 cents) in the prior-year period.
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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 six months were ¥1,831.6 billion ($23.3
billion), up ¥41.7 billion ($0.5 billion), or 2.3% from ¥1,789.8
billion ($23.1 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 ¥31.5 billion
($0.4 billion) in net interest income which came in at ¥876.2
billion ($11.1 billion). The year-over-year decline in net
interest income reflects tighter domestic deposit-loan margin,
reduced interest income in Global Markets segment and smaller
consumer-finance income. These declines were partially offset by
an upsurge in loan income in overseas business.
For Mitsubishi UFJ, trust fees along with net fees and
commissions totaled ¥518.4 billion ($6.6 billion) compared with
¥523.3 billion ($6.8 billion) as of September 30, 2011. Net
business profits stood at ¥817.1 billion ($10.4 billion), up
¥41.7 billion ($0.53 billion) or 2.2% from ¥799.7 billion ($10.3
billion) in the prior-year period.
The balance of securitized products and related investments at
the end of September 2012 increased to ¥1.83 trillion ($0.02
trillion) in total, an escalation of ¥0.17 trillion ($2.2
million) compared with the balance of ¥1.66 trillion ($0.02
trillion) as of March 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 ¥62.2 billion ($0.8
billion), which more than doubled from ¥28.6 billion ($0.37
billion) in the year-ago period. The upsurge was mainly due to
non-consolidated credit costs aided by a change of debtor credit
ratings, reflecting downturn in businesses of big borrowers.
Net losses on equity securities were ¥173.5 billion ($2.2
billion), up from ¥96.7 billion ($1.2 billion) in the prior-year
period, mainly due to higher costs on write-down of equity
securities due to reduced share prices.
For the quarter, other non-recurring losses were ¥11.2 billion
($0.1 billion), down from gains of ¥284.4 billion ($3.7 billion)
recorded in the comparable prior-year period. G&A expenses
climbed ¥24.2 billion ($0.3 billion), or 2.5% year over year to
¥1,014.4 billion ($12.9 billion), due to elevated costs in
As of September 30, 2012, Mitsubishi UFJ reported total loans of
¥84.8 trillion ($1.1 trillion), up from ¥84.6 trillion ($1.0
trillion) as of March 31, 2012, primarily due to higher demand in
domestic corporate loans and overseas loans. Moreover, deposits
climbed to ¥125.1 trillion ($1.6 trillion) from ¥124.8 trillion
($1.5 trillion) as of March 31, 2012, mainly due to an increase
in individual deposits.
Total net assets were ¥11.9 trillion ($0.15 trillion), up from
¥11.7 trillion ($0.14 trillion) as of March 31, 2012. Net
unrealized gains on securities available for sale declined to
¥699.6 billion ($9.0 billion), from ¥832.0 billion ($10.1
billion) as of March 31, 2012, aided by reduced unrealized gains
on equity securities, partially offset by a rise in unrealized
gains on Japanese government bonds and foreign bonds.
Mitsubishi UFJ Financial is targeting ¥670 billion ($8.4 billion)
of consolidated net income for the fiscal year ending March 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 the clients in the
United States an opportunity to expand the world-class lending
and capital markets services of both companies.
However, we are concerned about the heightening competition and
volatility in the Japanese economy.
Shares of Mitsubishi UFJ currently retain a Zacks #3 Rank, which
translates into a short-term Hold rating. Considering the
fundamentals, we also maintain a 'Neutral' recommendation on the