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Mitsubishi UFJ (MUFG) Earnings Improve Y/Y in Fiscal 2021

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Mitsubishi UFJ Financial (MUFG - Free Report) reported profits attributable to owners of parent for fiscal 2021 (ended Mar 31) of ¥1.13 billion ($9.7 million), up 45.5% year over year.

In the reported period, increased gross profits, higher trust as well as net fees, commissions, and decreased credit costs drove the upside. Further, a rise in loan and deposit balances acted as a positive. However, a rise in general and administrative (G&A) expenses, and a decline in net trading profits were headwinds.

In September 2021, MUFG entered into a definitive agreement to sells all shares in its subsidiary, MUFG Union Bank, to U.S. Bancorp (USB - Free Report) for a cash-and-stock transaction valued at $8 billion. The deal, which was expected to close in the first half of 2022, is now delayed and anticipated to close in second half of the year. The transaction is subject to regulatory approval.

Gross Profits Rise, G&A Expenses Escalate

Gross profits (before credit costs for trust accounts) for the said period were ¥3.96 trillion ($34.1 billion), up 1.1% year over year. This upsurge was mainly on higher net interest income (“NII”) and trust fees, as well as in net fees and commissions.

Results reflect a 7.3% increase in NII, which came in at ¥2.04 trillion ($17.5 billion). Trust fees, along with net fees and commissions, totaled ¥1.57 trillion ($13.5 billion), up 12.6%. However, for Mitsubishi UFJ, net trading profits (including net other operating profits) were ¥345.3 billion ($2.97 billion), down 44.1% year over year.

Mitsubishi UFJ’s total credit costs at the period end were ¥331.4 billion ($2.85 million), down from ¥515.5 billion witnessed a year ago. This was on account of 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 ¥332.6 billion ($2.86 billion). Other non-recurring losses totaled ¥121.9 billion ($1.05 billion) compared with ¥131.3 billion recorded in the prior-year period.

G&A expenses increased 2.8% year over year to ¥2.75 trillion ($23.7 billion). From 2021, expenses related to credit cards, which were previously recorded as G&A expenses, are recorded as fees and commission expenses. The amount of retroactive adjustment in fiscal 2020 was ¥76.9 billion.

Expense ratio was 69.3%, up from 68.1% in the prior-year period. An increase in this ratio indicates a fall in profitability.

Strong Capital Position

As of Mar 31, 2022, Mitsubishi UFJ reported period-end loans of ¥111.5 trillion ($914.3 billion), up from ¥107.5 trillion as of Mar 31, 2021. This rise can be primarily attributed to an increase in domestic corporate loans and overseas loans.

Deposits rose to ¥215.4 trillion ($1.77 trillion) from ¥211.5 trillion as of Mar 31, 2021, as demand for domestic individuals, domestic corporate, etc. and overseas and others deposits increased.

Total assets summed ¥373.7 trillion ($3.06 trillion), up from ¥359.47 trillion as of Mar 31, 2021. Net unrealized gains on securities available for sale decreased to ¥2.39 trillion ($19.6 billion) from ¥2.58 trillion as of Mar 31, 2021.

Moreover, total net assets were ¥17.99 trillion ($14.75 billion), up from ¥17.72 trillion as of Mar 31, 2021. Non-performing loan ratio expanded 33 basis points from March 2021 to 0.85%, on rise in non-performing loans.

Capital Deployment

The company announced a share repurchase program to buy back up to 600 million of MUFG’s common stock valid from May 17 to Nov 11, 2022.


Mitsubishi UFJ expects consolidated profits attributable to owners of parent of ¥1000 billion for fiscal 2022 (ending Mar 31, 2023).

Net operating profits of  ¥1300 is expected for fiscal 2022.

Management expects total credit costs to be ¥300 in fiscal 2022.

Ordinary profits of ¥1250 are anticipated for fiscal 2022.

Common equity tier 1 capital ratio is expected to be in the range of 9.5-10% in fiscal 2022.

Return on equity of 7.5% is targeted in fiscal year 2023.

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

Performance of Other Banks

First Horizon National Corporation’s (FHN - Free Report) first-quarter 2022 adjusted earnings per share of 38 cents beat the Zacks Consensus Estimate of 34 cents. However, the figure declined 25% year over year. Results excluded after-tax impacts of 4 cents per share from notable items related to the IBERIABANK Corporation and TD-Bank merger transactions.

First Horizon’s results reflect higher loan balance, provision benefits and declining expenses. However, declines in NII and fee income affected revenues. Also, pressure on margin due to low interest rates was a spoilsport for FHN.

M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $2.73 in first-quarter 2022, surpassing the Zacks Consensus Estimate of $2.26. However, MTB’s bottom line compares unfavorably with $3.41 per share reported in the year-ago period.

A rise in non-interest income and a strong capital position were tailwinds for M&T Bank. However, a fall in NII and net interest margin, and a surge in expenses were the key undermining factors.

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