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Mitsubishi UFJ (MUFG) Raises Profit Guidance for FY2021

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Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) has raised target for profits available to shareholders of parent company for the fiscal year ending Mar 31, 2021 by a whopping 25%. The decision was driven by improvement in business performance.

The new target has been set at ¥750 billion, up from ¥600 billion expected previously. The company expects net operating profits to increase on constant progress witnessed in performance, which is anticipated to have a positive impact of about ¥50 billion on profits available to shareholders.

Further, improvement in realized net gains/losses on equity securities is likely to have a positive impact of ¥30 billion due to rises in the stock market. Also, Mitsubishi UFJ anticipates ¥70 billion support from an increase in equity earnings from equity method investees and gains from investment in equity-method affiliate Morgan Stanley (MS - Free Report) .

The upward profits revision comes alongside its securities unit announcing that it expects a $270 million hit from an event that occurred on Mar 26 in MUFG Securities EMEA plc. Also, it said that the unit has successfully completed remedial measures to fix the potential loss. Mitsubishi UFJ seeks to recover loss from the client.

The event relates to Archegos Capital Management forcibly liquidating about $20 billion in a fire sale of shares on Friday, after failing to respond to the margin call. Post this, global investment banks that were providing service to the hedge fund started to dump large quantities of shares in which Archegos held positions.

The other two banks that have been hit hard by the failure of Archegos are Credit Suisse (CS - Free Report) and Nomura Holdings (NMR - Free Report) .

Our Take

Mitsubishi UFJ remains focused on leveraging its financial and digital capabilities with the help of its new three-year Medium-term Business Plan, beginning fiscal 2021. However, persistently low interest rates and rising costs remain key headwinds.

Shares of the company have gained 32.8% in the past six months compared with 44.8% growth of the industry.

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

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