We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Strategic Buyouts Aid Mitsubishi UFJ (MUFG), High Costs Ail
Read MoreHide Full Article
Mitsubishi UFJ Financial Group’s (MUFG - Free Report) strategic buyouts and focus on business upgradation plans aid growth. Also, its strong liquidity profile and capital strength support share repurchases. On the flip side, its revenue growth remains under pressure due to a decline in loan balances. Also, high costs are likely to limit bottom-line growth.
MUFG aims to strengthen its footprint in Southeast Asia. It has been establishing business platforms in the region through significant acquisitions. This week, it announced its plan to acquire an 80.6% stake in PT Mandala Multifinance Tbk, tapping on its product expertise and geographic presence to expand its auto loan business and bolster its presence in Indonesia.
Apart from strategic buyouts, MUFG has been focusing on its Medium-term Business Plan (2021 to 2023), including the upgradation and reformation of its business model. Through such efforts, it aims to achieve a return on equity of 7.5% by the end of fiscal 2023.
The primary source of liquidity for MUFG is its large balance of deposits which has been rising over the years. Also, as of Mar 31, 2023, the company had cash and due from banks of ¥113.63 trillion, exceeding its borrowed money of ¥24.86 trillion. Given a sound cash position, the company’s debt level seems manageable.
Also, MUFG’s capital ratios remained solid, well above the regulatory requirements. Hence, on the back of a strong liquidity profile and capital strength, MUFG has completed several share-repurchase programs, enhancing shareholder value.
However, MUFG’s net interest income remains under pressure due to the Bank of Japan's negative interest-rate policy and a decline in loan balances. The company’s loan balance has decreased over the years and its demand is likely to remain muted particularly due to lower consumer spending amid hovering recession fears. Thus, its revenue growth is likely to remain under pressure in the upcoming period.
Mitsubishi UFJ has been witnessing a persistent rise in expenses over the years, primarily due to higher salaries and employee-benefit expenditures. Going forward, an escalating cost base is likely to limit its bottom-line growth and operational efficiency.
The regulatory requirements under the new global capital and liquidity standards announced by The Basel Committee on Banking Supervision are likely be more stringent than those currently applicable for MUFG. Once fully implemented, these will raise its operating costs, thereby affecting profitability.
Shares of this Zacks Rank #3 (Hold) company have gained 4.1% on the NYSE over the past six months compared with the industry’s growth of 5.5%.
The Zacks Consensus Estimate for VEL’s 2023 earnings has been revised 14.8% upward over the past 30 days. The stock has increased 31% over the past six months.
The consensus estimate for CCB’s fiscal 2023 earnings has been revised 4.9% upward over the past 30 days. The company’s share price has decreased 21.7% over the past six months.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Strategic Buyouts Aid Mitsubishi UFJ (MUFG), High Costs Ail
Mitsubishi UFJ Financial Group’s (MUFG - Free Report) strategic buyouts and focus on business upgradation plans aid growth. Also, its strong liquidity profile and capital strength support share repurchases. On the flip side, its revenue growth remains under pressure due to a decline in loan balances. Also, high costs are likely to limit bottom-line growth.
MUFG aims to strengthen its footprint in Southeast Asia. It has been establishing business platforms in the region through significant acquisitions. This week, it announced its plan to acquire an 80.6% stake in PT Mandala Multifinance Tbk, tapping on its product expertise and geographic presence to expand its auto loan business and bolster its presence in Indonesia.
Apart from strategic buyouts, MUFG has been focusing on its Medium-term Business Plan (2021 to 2023), including the upgradation and reformation of its business model. Through such efforts, it aims to achieve a return on equity of 7.5% by the end of fiscal 2023.
The primary source of liquidity for MUFG is its large balance of deposits which has been rising over the years. Also, as of Mar 31, 2023, the company had cash and due from banks of ¥113.63 trillion, exceeding its borrowed money of ¥24.86 trillion. Given a sound cash position, the company’s debt level seems manageable.
Also, MUFG’s capital ratios remained solid, well above the regulatory requirements. Hence, on the back of a strong liquidity profile and capital strength, MUFG has completed several share-repurchase programs, enhancing shareholder value.
However, MUFG’s net interest income remains under pressure due to the Bank of Japan's negative interest-rate policy and a decline in loan balances. The company’s loan balance has decreased over the years and its demand is likely to remain muted particularly due to lower consumer spending amid hovering recession fears. Thus, its revenue growth is likely to remain under pressure in the upcoming period.
Mitsubishi UFJ has been witnessing a persistent rise in expenses over the years, primarily due to higher salaries and employee-benefit expenditures. Going forward, an escalating cost base is likely to limit its bottom-line growth and operational efficiency.
The regulatory requirements under the new global capital and liquidity standards announced by The Basel Committee on Banking Supervision are likely be more stringent than those currently applicable for MUFG. Once fully implemented, these will raise its operating costs, thereby affecting profitability.
Shares of this Zacks Rank #3 (Hold) company have gained 4.1% on the NYSE over the past six months compared with the industry’s growth of 5.5%.
Image Source: Zacks Investment Research
Finance Stocks Worth Considering
A couple of better-ranked stocks from the finance sector are Velocity Financial, Inc. (VEL - Free Report) and Coastal Financial Corporation (CCB - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VEL’s 2023 earnings has been revised 14.8% upward over the past 30 days. The stock has increased 31% over the past six months.
The consensus estimate for CCB’s fiscal 2023 earnings has been revised 4.9% upward over the past 30 days. The company’s share price has decreased 21.7% over the past six months.