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Mitsubishi UFJ's (MUFG) Profits Decline in 1H23, NII Rises
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Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits, attributable to owners of the parent for the first half of fiscal 2023 (ended Sep 30), of ¥231 billion ($1.67 billion), down 70.4% year over year.
Lower net profit in the first half was attributable to losses related to the sale of MUFG Union Bank. Nonetheless, in the reported period, the demand for overseas loans accelerated.
Higher trust fees and net interest income (“NII”) aided the results. However, higher general and administrative (G&A) costs, and net trading losses were headwinds.
Gross Profits Rise, G&A Expenses Escalate
Gross profits (before credit costs for trust accounts) for the first half were ¥ 2,323.4 billion ($16.8 billion), up 17.3% from the prior year. The upsurge was mainly on higher NII and trust fees.
Results reflect a 68.7% year-over-year increase in NII, which was ¥1,674 billion ($12.12 billion). Trust fees, along with net fees and commissions, totaled ¥772.2 billion ($5.59 billion), up 3.7%. However, for Mitsubishi UFJ, net trading losses (including net other operating profits) were ¥122.8 billion ($0.88 billion) against a profit of ¥243.6 billion in the prior year.
Mitsubishi UFJ’s total credit costs for the first half of fiscal 2023 were negative ¥243.8 billion ($1.76 billion) against ¥17.9 billion for the first half of fiscal 2022.
G&A expenses increased year over year from ¥1,343.2 billion to ¥1,428.1 billion ($10.3 billion).
The expense ratio was 61.4%, down from 67.8% in the prior-year period. A decrease in this ratio indicates a rise in profitability.
Balance Sheet Position Strong
As of Sep 30, 2022, Mitsubishi UFJ reported loans of ¥120.8 trillion ($835.8 billion), up 8.3% sequentially. The rise can be primarily attributed to an increase in overseas loans.
Deposits sequentially rose to ¥222.06 trillion ($1.53 trillion) from ¥215.4 trillion, as demand for domestic individuals, and overseas and other deposits increased.
Total assets summed ¥391.8 trillion ($2.70 trillion), up from ¥373.7 trillion as of Mar 31, 2022.
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 to face 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 Financial Group, Inc. Price, Consensus and EPS Surprise
HSBC Holdings (HSBC - Free Report) reported a third-quarter 2022 pre-tax profit of $3.1 billion, down 41.8% from the prior-year quarter.
Results reflected a rise in adjusted revenues. However, adjusted expenses increased from the year-ago quarter, which was a headwind for HSBC. Expected credit losses and other credit impairment charges were net charge in the quarter under review against a release in the prior-year quarter.
UBS Group AG (UBS - Free Report) reported a third-quarter 2022 net profit attributable to shareholders of $1.73 billion, down 37.6% from the prior-year quarter.
UBS’ performance was affected by a fall in revenues and a decline in total net credit loss releases. Nonetheless, operating expenses decreased from the prior-year quarter.
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Mitsubishi UFJ's (MUFG) Profits Decline in 1H23, NII Rises
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits, attributable to owners of the parent for the first half of fiscal 2023 (ended Sep 30), of ¥231 billion ($1.67 billion), down 70.4% year over year.
Lower net profit in the first half was attributable to losses related to the sale of MUFG Union Bank. Nonetheless, in the reported period, the demand for overseas loans accelerated.
Higher trust fees and net interest income (“NII”) aided the results. However, higher general and administrative (G&A) costs, and net trading losses were headwinds.
Gross Profits Rise, G&A Expenses Escalate
Gross profits (before credit costs for trust accounts) for the first half were ¥ 2,323.4 billion ($16.8 billion), up 17.3% from the prior year. The upsurge was mainly on higher NII and trust fees.
Results reflect a 68.7% year-over-year increase in NII, which was ¥1,674 billion ($12.12 billion). Trust fees, along with net fees and commissions, totaled ¥772.2 billion ($5.59 billion), up 3.7%. However, for Mitsubishi UFJ, net trading losses (including net other operating profits) were ¥122.8 billion ($0.88 billion) against a profit of ¥243.6 billion in the prior year.
Mitsubishi UFJ’s total credit costs for the first half of fiscal 2023 were negative ¥243.8 billion ($1.76 billion) against ¥17.9 billion for the first half of fiscal 2022.
G&A expenses increased year over year from ¥1,343.2 billion to ¥1,428.1 billion ($10.3 billion).
The expense ratio was 61.4%, down from 67.8% in the prior-year period. A decrease in this ratio indicates a rise in profitability.
Balance Sheet Position Strong
As of Sep 30, 2022, Mitsubishi UFJ reported loans of ¥120.8 trillion ($835.8 billion), up 8.3% sequentially. The rise can be primarily attributed to an increase in overseas loans.
Deposits sequentially rose to ¥222.06 trillion ($1.53 trillion) from ¥215.4 trillion, as demand for domestic individuals, and overseas and other deposits increased.
Total assets summed ¥391.8 trillion ($2.70 trillion), up from ¥373.7 trillion as of Mar 31, 2022.
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 to face 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 Financial Group, Inc. Price, Consensus and EPS Surprise
Mitsubishi UFJ Financial Group, Inc. price-consensus-eps-surprise-chart | Mitsubishi UFJ Financial Group, Inc. Quote
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 Foreign Banks
HSBC Holdings (HSBC - Free Report) reported a third-quarter 2022 pre-tax profit of $3.1 billion, down 41.8% from the prior-year quarter.
Results reflected a rise in adjusted revenues. However, adjusted expenses increased from the year-ago quarter, which was a headwind for HSBC. Expected credit losses and other credit impairment charges were net charge in the quarter under review against a release in the prior-year quarter.
UBS Group AG (UBS - Free Report) reported a third-quarter 2022 net profit attributable to shareholders of $1.73 billion, down 37.6% from the prior-year quarter.
UBS’ performance was affected by a fall in revenues and a decline in total net credit loss releases. Nonetheless, operating expenses decreased from the prior-year quarter.