Mitsubishi UFJ's Nine-Month Earnings Fall On High Expenses

Mitsubishi UFJ Financial Group Inc. (MTU - Analyst Report) reported profits attributable to owners of parent of ¥852.3 billion ($7.0 billion) for the first nine months (ended Dec 31) of fiscal year ended Mar 31, 2016, down 8.1% year over year.

For the period under review, an increase in general and administrative (G&A) expenses and decreased gross profits negatively impacted the results. However, a rise in net interest income and fee revenues served as tailwinds.

Performance in Detail

Gross profits for the period ended were ¥3.1 trillion ($0.03 trillion), down slightly year over year. The decline was mainly due to decreased net gains on debt securities, mostly offset by elevated overseas loan business net interest income and increased net fees and commissions from overseas business.

The period under review reflected a rise of around 1% in net interest income, which came in at ¥1.6 trillion ($0.01 trillion). For Mitsubishi UFJ, trust fees along with net fees and commissions totaled ¥1.04 trillion ($0.009 trillion), up 3% year over year. Further, net business profits came in at ¥1.17 trillion ($0.001 trillion), down 4% year over year.

The balance of securitized products and related investments as of Dec 31, 2015 increased to ¥3.17 trillion ($0.026 trillion) in total, reflecting a fall of ¥0.22 trillion from the balance as of Mar 31, 2015. The decrease was mainly due to reduced highly rated collateralized debt obligations (CLOs).

Mitsubishi UFJ’s total credit costs at December-end came in at ¥59.1 billion ($0.48 billion) as compared with a benefit of ¥30.9 billion ($0.29 billion) in the prior-year comparable period. The credit costs resulted from increased specific allowance for credit losses and a fall in reversal of credit costs.

Net gains on equity securities decreased 19.4% year over year to ¥63.6 billion ($0.52 billion). Gains decreased mainly due to lower gains on sale of equity securities.

Other non-recurring losses were ¥24 billion ($0.20 billion) compared with ¥5.4 billion ($0.05 billion) in the prior-year period.G&A expenses climbed 2.1% year over year to ¥1.93 trillion ($0.016 trillion), mainly due to higher costs in the overseas businesses, which was attributed to the depreciation of the Japanese yen.

Capital Position

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