Mitsubishi UFJ Announces Losses

Mitsubishi UFJ Financial Group, Inc. (MTU - Analyst Report) reported a fiscal year (March 31) loss of ¥271 billion versus ¥629 billion in net earnings in the year-ago period. This reflected ¥305 billion of increased credit costs related to deterioration in asset quality from the economic slowdown, a ¥384 billion jump in net losses from equity securities due to lower share prices, and ¥267 billion in losses from securitized products.

Gross profits for the period were ¥2,273 billion, down ¥240 billion, or 7%, from the ¥3,513 billion reported for the period ending March 31, 2008. This largely reflected a¥238 billion decline in trading income and other business profits due to ¥267 billion in losses from securitized products and a ¥103 billion decline in net fees and commissions from deterioration in the market environment, partly offset by a ¥134 billion increase in net interest income from higher overseas net lending income and consolidation of ACOM.

Credit-related costs jumped sharply, rising ¥305 billion, or 100%, to ¥608 billion from ¥304 billion in the year-ago period, and there was a ¥384 billion increase in losses on equity securities to a loss of ¥409 billion from a loss of ¥25 billion in the prior-year period. Operating expenses fell ¥32 billion, or 2%, year over year to ¥2,084 billion, as a result of solid cost control. Due to the foregoing, net income fell ¥900 billion to ¥271 billion loss for the period ending March 31, 2009 from ¥629 billion in earnings in the prior-year period.

Asset quality worsened, with problem loans up ¥67 billion sequentially to ¥1,190 billion at March 31, 2009 from ¥1,123 billion at December 31, 2008 as a percentage of total loans, nonperforming loans deteriorated, rising to 1.25% at March 31, 2009 from 1.17% at December 31, 2008, while reserves to nonperforming loans decreased to 100% from 113%.

Risk-adjusted capital ratios for the quarter ending December 31, 2008 improved on a decline in risk-adjusted assets, with the Tier 1 ratio up 16 basis points to 7.76% at March 31, 2009 (below the company’s 8% target) from 7.60% at March 31, 2008, and the Total capital ratio advancing to 11.76% (below MTU’s 12% target) at March 31, 2009 from 11.19% at March 31, 2008.