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Mitsubishi UFJ (MUFG) Reports Impressive Earnings in Q3

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Mitsubishi UFJ Financial (MUFG - Free Report) reported profits attributable to owners of parent for the third quarter of fiscal 2021 (ended Dec 31) of ¥1.07 billion ($9.42 billion), up 76.3% year over year.

In the reported period, increased gross profits, higher trust fees along with net fees, and commissions and decreased credit costs drove the upside. However, a rise in general and administrative expenses and a decline in loan and deposit balances acted as headwinds.

Gross Profits Rise, G&A Expenses Escalate

Gross profits (before credit costs for trust accounts) for the said period were ¥2.95 trillion ($0.02 trillion), up marginally year over year. This upsurge was mainly on higher net interest income (NII) and trust fees, and net fees and commissions.

Results reflect a 7.2% increase in NII, which came in at ¥1.49 trillion ($13.12 billion). Net trading profits (including net other operating profits) were ¥328.9 billion ($2.89 billion), decreasing 41% year over year. Nonetheless, for Mitsubishi UFJ, trust fees along with net fees and commissions totaled ¥1.13 trillion ($9.95 billion), up 13.5%.

Mitsubishi UFJ’s total credit costs at the period end were ¥27.2 billion ($239.36 million) compared with ¥343.6 billion witnessed a year ago. This was on account of an improved credit quality and reversal of the allowance and reversal of allowance for credit losses associated with the decision to sell all shares of MUFG Union Bank, N.A.

Net gains on equity securities increased substantially year over year to ¥194.8 billion ($1.71 billion). Other non-recurring losses totaled ¥31.5 million ($0.28 million) compared to of ¥97.2 million ($0.86 million) recorded in the prior-year period.

G&A expenses increased 2.5% year over year to ¥2.02 trillion ($17.76 billion). From 2021, expenses related to credit cards, which were previously recorded as G&A expenses, are recorded as fees and commissions expenses. The amount of retroactive adjustment in third-quarter fiscal 2020 was ¥53.9 billion.

Expense ratio was 68.3%, up from 66.9% in the prior-year period. An increase in this ratio indicates a fall in profitability.

Mixed Capital Position

As of Dec 31, 2021, Mitsubishi UFJ reported period-end loans of ¥106.9 trillion ($0.93 trillion), down from ¥107.5 trillion as of Mar 31, 2021. This decline can be chiefly attributed to a fall in domestic corporate loans.

Deposits dropped to ¥211.4 trillion ($1.836 trillion) from ¥211.5 trillion as of Mar 31, 2021, as demand for domestic and corporate, etc. deposits as well as overseas and others deposits decreased.

Total assets summed ¥365.78 trillion ($3.18 trillion), up from ¥359.47 trillion as of Mar 31, 2021. Net unrealized gains on securities available for sale decreased to ¥2.47 trillion ($0.021 trillion) from ¥2.58 trillion as of Mar 31, 2021.

Moreover, total net assets were ¥18.62 trillion ($0.16 trillion), up from ¥17.72 trillion as of Mar 31, 2021. Non-performing loan ratio expanded 10 basis points from March 2021 to 0.95%, on rise in non-performing loans.


Mitsubishi UFJ expects consolidated profits attributable to owners of parent of ¥1050 billion for fiscal 2021 (ending Mar 31, 2022).

Management expects to pay a total dividend of ¥28 for the fiscal 2021.

Our Viewpoint

MUFG has a robust business model, a diversified product mix and solid capital ratios. Supported by a strong liquidity position, Mitsubishi UFJ remains poised for inorganic growth. However, MUFG continues facing challenges in controlling costs, which are hurting its bottom line. Also, Japan’s strict regulations are likely to keep its financials under pressure.

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.

Performance of Other Banks

First Republic Bank’s (FRC - Free Report) fourth-quarter 2021 earnings per share of $2.02 surpassed the Zacks Consensus Estimate of $1.91. Additionally, the bottom line improved 26.3% from the year-ago quarter’s level.

FRC’s quarterly results were supported by a higher net interest income and non-interest income. Moreover, First Republic’s balance-sheet position was strong in the quarter. However, higher expenses and elevated net loan charge-offs were the offsetting factors.

Citigroup Inc. (C - Free Report) delivered an earnings surprise of 5.04% in fourth-quarter 2021. Income from continuing operations per share of $1.46 outpaced the Zacks Consensus Estimate of $1.39. However, the reported figure declined 24% from the prior-year quarter’s level.

Citigroup’s investment banking revenues jumped in the quarter under review, driven by equity underwriting and growth in advisory revenues. However, fixed-income revenues were down due to declining rates and spread products.

U.S. Bancorp (USB - Free Report) reported fourth-quarter 2021 earnings per share of $1.07, which missed the Zacks Consensus Estimate of $1.11. Results, however, compare favorably with the prior-year quarter’s figure of 95 cents.

Though lower revenues and escalating expenses were disappointing factors, credit quality was a tailwind. Growth in loan and deposit balance, and a strong capital position were also encouraging factors. Moreover, U.S. Bancorp closed the acquisition of San Francisco-based fintech firm TravelBank, which offers technology-driven cost and travel management solutions.