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Mitsubishi UFJ's (MUFG) Nine Months' Earnings Decline Y/Y

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Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for the first nine months of fiscal 2023 (ended Dec 31, 2022) of ¥343.2 billion ($2.52 billion), down 67.9% year over year.

Profits attributable to owners of the parent, taking into account gains on the sale of shares in MUFG Union Bank, were ¥1,144 billion ($8.4 billion).

Lower net profits in the first nine months of fiscal 2023 were due to losses associated with accounting treatment related to the sale of shares of MUB.

Higher net interest income (“NII”) aided the results. However, higher general and administrative (G&A) costs hurt results to some extent.

Gross Profits Improve, G&A Expenses Rise

Gross profits (before credit costs for trust accounts) for the nine-month period were ¥ 3,579.8 billion ($26.3 billion), up 21.3% from the prior-year period. The upsurge was mainly driven by higher NII.

Results reflect a 55.1% year-over-year increase in NII, which was ¥2,313.7 billion ($17 billion). Trust fees, along with net fees and commissions, totaled ¥1,248 billion ($9.2 billion), up 10.4%. However, for Mitsubishi UFJ, net trading profits (including net other operating profits) were ¥18.1 billion ($0.13 billion), down 94.5% from the prior-year period.

Mitsubishi UFJ’s total credit costs were negative ¥484.5 billion ($3.6 billion), up significantly from the first nine months of fiscal 2022.

G&A expenses increased 8.9% year over year to ¥2,198.3 billion ($16.2 billion).

The expense ratio was 61.4%, down from 68.3% in the prior-year period. A decrease in this ratio indicates a rise in profitability.

Balance Sheet Position Strong

As of Dec 31, 2022, Mitsubishi UFJ reported loans of ¥119.2 trillion ($883.2 billion), up 8% from Mar 31, 2022. Deposits rose 2.3% to ¥220.4 trillion ($1.63 trillion).

Total assets summed ¥391.4 trillion ($2.90 trillion), up 4.7% from 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 is poised for inorganic growth.

In December, MUFG completed its sale of MUFG Union Bank’s core retail banking operations to U.S. Bancorp in a cash-cum-stock transaction, which will bolster U.S. Bancorp’s presence on the West Coast.

Under the terms of the deal, announced in September 2021, U.S. Bancorp paid $5.5 billion in cash and issued almost 44 million shares of U.S. Bancorp common stock. At closure, MUFG holds a minority stake of roughly 3% in U.S. Bancorp.

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

Commerce Bancshares Inc.’s (CBSH - Free Report) fourth-quarter 2022 earnings per share of $1.04 surpassed the Zacks Consensus Estimate of $1.02. The bottom line increased 15.6% from the prior-year quarter.

Results primarily benefited from an improvement in net interest income, a slight rise in loan balance and higher rates. However, an increase in non-interest expenses and provisions, and a fall in non-interest income were the major headwinds for CBSH.

BankUnited, Inc.’s (BKU - Free Report) fourth-quarter 2022 earnings per share of 82 cents missed the Zacks Consensus Estimate of $1.11 by a considerable margin. The bottom line also declined 41.8% from the prior-year quarter. We had projected earnings per share of 96 cents.

BKU’s results were adversely impacted by subdued fee income performance and an increase in credit costs. However, higher net interest income, a decent rise in loan balance, increasing rates and a fall in expenses acted as tailwinds.

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