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Mitsubishi UFJ (MTU) Disappoints on Dismal FY16 Earnings
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Mitsubishi UFJ Financial Group Inc. reported profits attributable to owners of parent of ¥926.4 billion ($8.1 billion) for fiscal year ended Mar 31, 2017, down 2.6% year over year.
For the period under review, decreased gross profits and fall in net interest income hurt the results, while stable general & administrative expenses and low credit costs served as tailwinds.
Gross Profits Down, General & Administrative Expenses Stable
Gross profits for the period being reported were ¥4.0 trillion ($0.04 trillion), down 2.4% year over year. The decline was mainly due to decreased net interest income from domestic loan and deposit, appreciation of the Japanese Yen, along with fall in fee income from sale of investment products and net gains on debt securities. These were partially mitigated by rise in net interest income from overseas loans and deposits.
The period under review reflected a decline of around 4.3% in net interest income, which came in at ¥2.0 trillion ($0.02 trillion). For Mitsubishi UFJ, trust fees, along with net fees and commissions, totaled ¥1.5 trillion ($0.01 trillion), up 7.1% year over year. Further, net trading profits came in at ¥536.7 billion ($4.72 billion), down 9.3% year over year.
Mitsubishi UFJ’s total credit costs, at fiscal year end, came in at ¥155.3 billion ($1.37 billion), down 39.1% year over year. The credit costs declined due to reduction in provision of allowance for credit losses.
Net gains on equity securities jumped 12.1% year over year to ¥127.4 billion ($1.12 billion). Gains increased primarily owing to increase in sale of equity holdings.
Other non-recurring losses were ¥271.4 billion ($2.39 billion) compared with ¥82 billion incurred in the prior-year period. G&A expenses were almost stable at ¥2.59 trillion ($0.02 trillion), mainly on the account of appreciation of the Japanese yen against other currencies.
Strong Capital Position
As of Mar 31, 2017, Mitsubishi UFJ reported total loans of ¥109.2 trillion ($0.98 trillion), up from ¥105.1 trillion ($1.04 trillion) as of Sep 30, 2016. The increase is chiefly attributed to rise in demand of domestic corporate and overseas loans, partially mitigated by increased translated Japanese yen value of overseas loans as it depreciated against the other currencies.
In addition, deposits climbed to ¥170.7 trillion ($1.53 trillion) from ¥161.6 trillion ($1.59 trillion) as of Sep 30, 2016, as demand for domestic corporate deposits increased.
Total assets summed ¥303.3 trillion ($2.73 trillion), up from ¥293.7 trillion ($2.90 trillion) as of Sep 30, 2016. Net unrealized gains on securities available for sale decreased to ¥3.1 trillion ($0.028 trillion) from ¥3.4 trillion ($0.034 trillion) as of Sep 30, 2016. The fall stemmed from decreases in foreign bonds and Japanese government bonds, partially offset by increases in domestic equities.
Moreover, total net assets were ¥16.7 trillion ($0.15 trillion), up from ¥16.5 trillion ($0.16 trillion) as of Sep 30, 2016. Non-performing loan ratio contracted 7 basis points from Sep 2016 to 1.11%, on account of reduction in non-performing loans and a rise in total loans.
Risk-weighted assets were ¥114.0 trillion ($1.02 trillion), up from ¥105.2 trillion ($0.16 trillion) as of Sep 30, 2016.
As of Mar 31, 2017, total capital, Tier 1 capital and Common Equity Tier 1 capital ratio were 15.85%, 13.36% and 11.76% as compared with 16.56%, 13.50% and 12.20% as of Sep 30, 2016, respectively.
Outlook
Mitsubishi UFJ Financial announced its target of ¥950 billion of consolidated net income for the fiscal year ending Mar 31, 2018. Total credit costs are estimated at ¥160 billion.
Our Viewpoint
Though Mitsubishi UFJ’s robust business model and diversified product mix look encouraging, a lower gross profit poses concern. Moreover, we are wary about the heightening competition and volatility in the Japanese economy.
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$6.2 billion ($1.97 billion) in first-quarter 2017, up 19.2% year over year. Including non-recurring items, net income came in at R$6.1 billion ($1.94 billion), up 17.3% year over year. Results reflected an increase in revenues and a solid balance-sheet position. However, elevated expenses and lower managerial financial margin were headwinds.
Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter. Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
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Mitsubishi UFJ (MTU) Disappoints on Dismal FY16 Earnings
Mitsubishi UFJ Financial Group Inc. reported profits attributable to owners of parent of ¥926.4 billion ($8.1 billion) for fiscal year ended Mar 31, 2017, down 2.6% year over year.
For the period under review, decreased gross profits and fall in net interest income hurt the results, while stable general & administrative expenses and low credit costs served as tailwinds.
Gross Profits Down, General & Administrative Expenses Stable
Gross profits for the period being reported were ¥4.0 trillion ($0.04 trillion), down 2.4% year over year. The decline was mainly due to decreased net interest income from domestic loan and deposit, appreciation of the Japanese Yen, along with fall in fee income from sale of investment products and net gains on debt securities. These were partially mitigated by rise in net interest income from overseas loans and deposits.
The period under review reflected a decline of around 4.3% in net interest income, which came in at ¥2.0 trillion ($0.02 trillion). For Mitsubishi UFJ, trust fees, along with net fees and commissions, totaled ¥1.5 trillion ($0.01 trillion), up 7.1% year over year. Further, net trading profits came in at ¥536.7 billion ($4.72 billion), down 9.3% year over year.
Mitsubishi UFJ’s total credit costs, at fiscal year end, came in at ¥155.3 billion ($1.37 billion), down 39.1% year over year. The credit costs declined due to reduction in provision of allowance for credit losses.
Net gains on equity securities jumped 12.1% year over year to ¥127.4 billion ($1.12 billion). Gains increased primarily owing to increase in sale of equity holdings.
Other non-recurring losses were ¥271.4 billion ($2.39 billion) compared with ¥82 billion incurred in the prior-year period. G&A expenses were almost stable at ¥2.59 trillion ($0.02 trillion), mainly on the account of appreciation of the Japanese yen against other currencies.
Strong Capital Position
As of Mar 31, 2017, Mitsubishi UFJ reported total loans of ¥109.2 trillion ($0.98 trillion), up from ¥105.1 trillion ($1.04 trillion) as of Sep 30, 2016. The increase is chiefly attributed to rise in demand of domestic corporate and overseas loans, partially mitigated by increased translated Japanese yen value of overseas loans as it depreciated against the other currencies.
In addition, deposits climbed to ¥170.7 trillion ($1.53 trillion) from ¥161.6 trillion ($1.59 trillion) as of Sep 30, 2016, as demand for domestic corporate deposits increased.
Total assets summed ¥303.3 trillion ($2.73 trillion), up from ¥293.7 trillion ($2.90 trillion) as of Sep 30, 2016. Net unrealized gains on securities available for sale decreased to ¥3.1 trillion ($0.028 trillion) from ¥3.4 trillion ($0.034 trillion) as of Sep 30, 2016. The fall stemmed from decreases in foreign bonds and Japanese government bonds, partially offset by increases in domestic equities.
Moreover, total net assets were ¥16.7 trillion ($0.15 trillion), up from ¥16.5 trillion ($0.16 trillion) as of Sep 30, 2016. Non-performing loan ratio contracted 7 basis points from Sep 2016 to 1.11%, on account of reduction in non-performing loans and a rise in total loans.
Risk-weighted assets were ¥114.0 trillion ($1.02 trillion), up from ¥105.2 trillion ($0.16 trillion) as of Sep 30, 2016.
As of Mar 31, 2017, total capital, Tier 1 capital and Common Equity Tier 1 capital ratio were 15.85%, 13.36% and 11.76% as compared with 16.56%, 13.50% and 12.20% as of Sep 30, 2016, respectively.
Outlook
Mitsubishi UFJ Financial announced its target of ¥950 billion of consolidated net income for the fiscal year ending Mar 31, 2018. Total credit costs are estimated at ¥160 billion.
Our Viewpoint
Though Mitsubishi UFJ’s robust business model and diversified product mix look encouraging, a lower gross profit poses concern. Moreover, we are wary about the heightening competition and volatility in the Japanese economy.
Mitsubishi UFJ currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Mitsubishi UFJ Financial Group Inc Price
Mitsubishi UFJ Financial Group Inc Price | Mitsubishi UFJ Financial Group Inc Quote
Competitive Landscape
Itau Unibanco Holding S.A. (ITUB - Free Report) posted recurring earnings of R$6.2 billion ($1.97 billion) in first-quarter 2017, up 19.2% year over year. Including non-recurring items, net income came in at R$6.1 billion ($1.94 billion), up 17.3% year over year. Results reflected an increase in revenues and a solid balance-sheet position. However, elevated expenses and lower managerial financial margin were headwinds.
Deutsche Bank AG (DB - Free Report) reported net income of €575 million ($612.6 million) in first-quarter 2017, significantly up on a year-over-year basis. Income before income taxes came in at €878 million ($935.4 million), up 52% year over year. Cost management and reduction in provisions were positive factors. However, lower revenues adversely affected the results.
UBS Group AG (UBS - Free Report) reported first-quarter 2017 pre-tax operating profit of CHF 1.93 billion ($1.92 billion) on an adjusted basis, up 40.9% from the prior-year quarter. Results reflected increase in net trading income (up 42% year over year), along with net fee and commission income (up 6% year over year). Notably, the quarter benefited from the company’s consistent focus on expense management.
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If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>
Note: Exchange Rate: 0.008793