Back to top

Image: Bigstock

Will Negative Rates Hit Mitsubishi UFJ'S (MTU) Q2 Earnings?

Read MoreHide Full Article

Mitsubishi UFJ Financial Group, Inc. is scheduled to report its second-quarter fiscal 2017 (ended Sep 30) results on Nov 14.

The Japanese banking giant – Mitsubishi UFJ – had reported profits attributable to owners of parent of ¥188.9 billion ($1.75 billion) for first-quarter fiscal 2017 (ended Jun 30), down 32% year over year. Results were affected by lower net interest income and higher credit costs. However, fall in general & administrative expenses acted as a tailwind.

Year to date, Mitsubishi UFJ lost around 14% on the NYSE.

Will Mitsubishi UFJ disappoint in the upcoming release as well? Let's see what factors might have influenced the earnings report this time around.

Factors to Influence Q2 Results

Profitability of Mitsubishi UFJ is likely to be hit by the sluggish growth in the Japanese economy and continued negative interest rate environment which was adopted by the Bank of Japan earlier this year. While central banks of most of the countries aim to boost growth and inflation through negative interest rates policy, this takes a toll on the banks’ net interest income. Notably, in the last quarter, Mitsubishi UFJ had reaffirmed its target of ¥850 billion of consolidated net income for the fiscal year ending Mar 31, 2017, reflecting a decline of 11% year over year.

Quarterly results may also be affected by the continued appreciation of Japanese Yen against other currencies. According to the International Monetary Fund’s (IMF) latest report on World Economic Outlook, since Mar 2016 till mid-Sep 2016, Japanese yen has appreciated around 10%. Appreciation of domestic currency is likely to have impacted Mitsubishi UFJ’s overseas loans and deposits balances in the to-be-reported quarter.

Additionally, bottom-line growth might be hurt by continued rise in expenses, driven by regulatory costs in overseas businesses.

However, on a positive note, quarterly results might get a lift from the fee income base. Also, revenues should benefit from the company’s prior acquisitions.

Currently, Mitsubishi UFJ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Among other foreign banks, Royal Bank of Canada (RY - Free Report) , The Toronto-Dominion Bank (TD - Free Report) and Bank of Montreal (BMO - Free Report) are expected to release results on Nov 30, Dec1 and Dec 6, respectively.

Zacks' Top Investment Ideas for Long-Term Profit

How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Bank Of Montreal (BMO) - free report >>

Toronto Dominion Bank (The) (TD) - free report >>

Royal Bank Of Canada (RY) - free report >>

Published in