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Analyst Blog

On Jul 3, Zacks Investment Research upgraded Mitsubishi UFJ Financial Group Inc. to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Following impressive fiscal year 2013 (ended Mar 31, 2014) results, Mitsubishi UFJ has been witnessing rising earnings estimates over the last 30 days. The Zacks Consensus Estimate for fiscal 2014 increased 11.9% to 66 cents per share over the last 30 days. For fiscal 2015, the Zacks Consensus Estimate advanced 8.1% to 67 cents per share over the same time period.

Mitsubishi UFJ recorded net income of ¥984.8 billion ($9.8 billion) for the fiscal year ended Mar 31, 2014, up 15.5% year over year. Notably, the reported results achieved the company’s net income target of ¥910 billion.

For the year, growth in deposits and loans, along with a rise in net interest income and fee revenues, were the tailwinds. Further, increased gross profits were a positive. However, the results reflected a rise in G&A expenses that indicate inefficient expense management.

Mitsubishi UFJ Financial reiterated the target of ¥950 billion ($9.22 billion) of consolidated net income for the fiscal year ending Mar 31, 2015.

The primary source of liquidity for MUFG is its large balance of deposits, primarily ordinary deposits, certificates of deposits and time deposits. Due to its broad customer base in Japan and the depositors’ preference to seek the safety of deposits at large financial institutions, the balance of deposits climbed 9.9% year over year to ¥144.8 trillion ($1.41 trillion) as of Mar 31, 2014, mainly driven by higher individual, corporate and overseas deposits.

Other Stocks to Consider

Some other foreign banks worth considering include The Royal Bank of Scotland Group plc , Banco Bradesco S.A. and BBVA Banco Franc . All of these carry a Zacks Rank #1.

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