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Mitsubishi UFJ (MUFG) Reports Impressive Earnings in FY17
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Mitsubishi UFJ Financial Group Inc. (MUFG - Free Report) reported profits attributable to owners of parent for fiscal 2017 (ended Mar 31), of ¥989.6 billion ($8.9 billion), up 6.8% year over year. Notably, results exceeded the company’s target of ¥950 billion.
For the period under review, low credit costs and strong capital drove the results, while elevated general & administrative expenses, decreased gross profits and decline in net interest income acted as headwinds.
Gross Profits Down, General & Administrative Expenses Escalate
Gross profits for the period being reported were ¥3.85 trillion ($0.03 trillion), down 4% year over year. The decline was mainly due to decreased net interest income from domestic loans and deposits, along with bond portfolios, and reduced net gains on debt securities, partly offset by stable net interest income from overseas loans and deposits.
The period under review reflected a decline of around 5.4% in net interest income, which came in at ¥1.91 trillion ($0.02 trillion). Net trading profits came in at ¥497.6 billion ($4.5 billion), down 7.3% year over year. Further, for Mitsubishi UFJ, trust fees, along with net fees and commissions, totaled ¥1.45 trillion ($0.01 trillion), slightly down year over year.
Mitsubishi UFJ’s total credit costs, at the quarter end, came in at ¥46.1 billion ($0.4 billion), plunging 70.3% year over year. The credit costs declined on a consolidated basis, while reported net reversal on a non-consolidated basis.
Net gains on equity securities jumped 6.6% year over year to ¥133.1 billion ($1.2 billion). Gains increased primarily owing to increase in sale of equity holdings.
Other non-recurring losses came in at ¥100.3 billion ($0.9 billion) compared with ¥271.4 billion incurred in the prior-year period. G&A expenses flared up 1.2% year over year to ¥2.62 trillion ($0.02 trillion), mainly on the account of elevated overseas expenses.
Strong Capital Position
As of Mar 31, 2018, Mitsubishi UFJ reported total loans of ¥108.4 trillion ($1.02 trillion), down from ¥109.2 trillion ($0.98 trillion) as of Mar 31, 2017. The decrease was chiefly attributed to fall in housing loans, along with loans to government and governmental institutions.
However, deposits climbed to ¥177.3 trillion ($1.67 trillion) from ¥170.7 trillion ($1.53 trillion) as of Mar 31, 2017, as demand for individual and overseas deposits increased.
Total assets summed ¥306.9 trillion ($2.89 trillion), up from ¥303.3 trillion ($2.73 trillion) as of Mar 31, 2017. Net unrealized gains on securities available for sale increased to ¥3.5 trillion ($0.03 trillion) from ¥3.2 trillion ($0.029 trillion) as of Mar 31, 2017. The rise stemmed from increases in domestic equities.
Moreover, total net assets were ¥17.3 trillion ($0.16 trillion), up from ¥16.6 trillion ($0.15 trillion) as of Mar 31, 2017. Non-performing loan ratio contracted 22 basis points from March 2017 to 0.88%, due to reduction in non-performing loans.
Strong Capital Ratios
Mitsubishi UFJ’s common equity tier 1 capital ratio was 12.58% as of Mar 31, 2018 compared with 11.76% as of Mar 31, 2017. Furthermore, Tier 1 capital ratio was 14.32%, up from 13.36% as of Mar 31, 2017. Total Capital ratio climbed to 16.56% from 15.85% as of Mar 31, 2017.
Total risk-weighted assets came in at ¥113.5 trillion ($1.07 trillion), slightly down year over year.
Outlook
Mitsubishi UFJ Financial announced its target of ¥850 billion of consolidated net income for the fiscal ending Mar 31, 2019. Total credit costs are estimated at ¥120 billion and net operating profits at ¥1.04 trillion.
Our Viewpoint
Though we are wary about the heightening competition and volatility in the Japanese economy, along with escalating expenses, Mitsubishi UFJ’s robust business model and diversified product mix look encouraging. Furthermore, increase in profits and low credit costs remain tailwinds.
Deutsche Bank AG (DB - Free Report) reported net income of €120 million ($147.5 million) in first-quarter 2018 (ended Mar 31, 2018), which tanked 79% on a year-over-year basis. Income before income taxes plunged 50.8% year over year to €432 million ($531 million). Lower revenues, mainly due to exchange-rate movements, were an undermining factor. Moreover, expenses escalated in the reported quarter. Notably, net asset outflows were recorded during the quarter. However, reduction in provisions was a positive.
Barclays (BCS - Free Report) incurred first-quarter 2018 (ended Mar 31, 2018) net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the prior-year quarter. Results for the reported quarter included £1.4 billion charges related to settlement of residential mortgage-backed securities case with the U.S. Department of Justice and charges of £400 million relating to payment protection insurance.
UBS Group AG (UBS - Free Report) reported first-quarter 2018 (ended Mar 31, 2018) net profit attributable to shareholders of CHF 1.5 billion ($1.6 billion), up around 19% from the prior-year quarter. Results displayed rise in net fee and commission income (up 3% year over year) and higher net interest income (up 3% year over year). Nevertheless, the quarter underlined elevated expenses.
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Mitsubishi UFJ (MUFG) Reports Impressive Earnings in FY17
Mitsubishi UFJ Financial Group Inc. (MUFG - Free Report) reported profits attributable to owners of parent for fiscal 2017 (ended Mar 31), of ¥989.6 billion ($8.9 billion), up 6.8% year over year. Notably, results exceeded the company’s target of ¥950 billion.
For the period under review, low credit costs and strong capital drove the results, while elevated general & administrative expenses, decreased gross profits and decline in net interest income acted as headwinds.
Gross Profits Down, General & Administrative Expenses Escalate
Gross profits for the period being reported were ¥3.85 trillion ($0.03 trillion), down 4% year over year. The decline was mainly due to decreased net interest income from domestic loans and deposits, along with bond portfolios, and reduced net gains on debt securities, partly offset by stable net interest income from overseas loans and deposits.
The period under review reflected a decline of around 5.4% in net interest income, which came in at ¥1.91 trillion ($0.02 trillion). Net trading profits came in at ¥497.6 billion ($4.5 billion), down 7.3% year over year. Further, for Mitsubishi UFJ, trust fees, along with net fees and commissions, totaled ¥1.45 trillion ($0.01 trillion), slightly down year over year.
Mitsubishi UFJ’s total credit costs, at the quarter end, came in at ¥46.1 billion ($0.4 billion), plunging 70.3% year over year. The credit costs declined on a consolidated basis, while reported net reversal on a non-consolidated basis.
Net gains on equity securities jumped 6.6% year over year to ¥133.1 billion ($1.2 billion). Gains increased primarily owing to increase in sale of equity holdings.
Other non-recurring losses came in at ¥100.3 billion ($0.9 billion) compared with ¥271.4 billion incurred in the prior-year period. G&A expenses flared up 1.2% year over year to ¥2.62 trillion ($0.02 trillion), mainly on the account of elevated overseas expenses.
Strong Capital Position
As of Mar 31, 2018, Mitsubishi UFJ reported total loans of ¥108.4 trillion ($1.02 trillion), down from ¥109.2 trillion ($0.98 trillion) as of Mar 31, 2017. The decrease was chiefly attributed to fall in housing loans, along with loans to government and governmental institutions.
However, deposits climbed to ¥177.3 trillion ($1.67 trillion) from ¥170.7 trillion ($1.53 trillion) as of Mar 31, 2017, as demand for individual and overseas deposits increased.
Total assets summed ¥306.9 trillion ($2.89 trillion), up from ¥303.3 trillion ($2.73 trillion) as of Mar 31, 2017. Net unrealized gains on securities available for sale increased to ¥3.5 trillion ($0.03 trillion) from ¥3.2 trillion ($0.029 trillion) as of Mar 31, 2017. The rise stemmed from increases in domestic equities.
Moreover, total net assets were ¥17.3 trillion ($0.16 trillion), up from ¥16.6 trillion ($0.15 trillion) as of Mar 31, 2017. Non-performing loan ratio contracted 22 basis points from March 2017 to 0.88%, due to reduction in non-performing loans.
Strong Capital Ratios
Mitsubishi UFJ’s common equity tier 1 capital ratio was 12.58% as of Mar 31, 2018 compared with 11.76% as of Mar 31, 2017. Furthermore, Tier 1 capital ratio was 14.32%, up from 13.36% as of Mar 31, 2017. Total Capital ratio climbed to 16.56% from 15.85% as of Mar 31, 2017.
Total risk-weighted assets came in at ¥113.5 trillion ($1.07 trillion), slightly down year over year.
Outlook
Mitsubishi UFJ Financial announced its target of ¥850 billion of consolidated net income for the fiscal ending Mar 31, 2019. Total credit costs are estimated at ¥120 billion and net operating profits at ¥1.04 trillion.
Our Viewpoint
Though we are wary about the heightening competition and volatility in the Japanese economy, along with escalating expenses, Mitsubishi UFJ’s robust business model and diversified product mix look encouraging. Furthermore, increase in profits and low credit costs remain tailwinds.
Mitsubishi UFJ Financial Group, Inc. Price
Mitsubishi UFJ Financial Group, Inc. Price | Mitsubishi UFJ Financial Group, Inc. Quote
Mitsubishi UFJ currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Deutsche Bank AG (DB - Free Report) reported net income of €120 million ($147.5 million) in first-quarter 2018 (ended Mar 31, 2018), which tanked 79% on a year-over-year basis. Income before income taxes plunged 50.8% year over year to €432 million ($531 million). Lower revenues, mainly due to exchange-rate movements, were an undermining factor. Moreover, expenses escalated in the reported quarter. Notably, net asset outflows were recorded during the quarter. However, reduction in provisions was a positive.
Barclays (BCS - Free Report) incurred first-quarter 2018 (ended Mar 31, 2018) net loss attributable to ordinary equity holders of £764 million ($1.06 billion). Net income attributable to ordinary equity holders was £190 million ($248 million) in the prior-year quarter. Results for the reported quarter included £1.4 billion charges related to settlement of residential mortgage-backed securities case with the U.S. Department of Justice and charges of £400 million relating to payment protection insurance.
UBS Group AG (UBS - Free Report) reported first-quarter 2018 (ended Mar 31, 2018) net profit attributable to shareholders of CHF 1.5 billion ($1.6 billion), up around 19% from the prior-year quarter. Results displayed rise in net fee and commission income (up 3% year over year) and higher net interest income (up 3% year over year). Nevertheless, the quarter underlined elevated expenses.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>