Mitsubishi UFJ Quarterly Profit More Than Doubles as Bad-Loan Costs Fall
Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, reported first-quarter profit that more than doubled, beating analysts’ estimates as bad loan charges fell and bond trading increased.
Net income rose to 166.3 billion yen ($1.9 billion) for the three months ended June 30 from 75.9 billion yen a year earlier, the Tokyo-based bank said today. The average of five estimates from analysts surveyed by Bloomberg was for earnings of 125 billion yen.
Japanese corporate bankruptcies fell for an 11th straight month in June as the world’s second-biggest economy recovers and confidence improves among the nation’s manufacturers. The decline in corporate failures helped Mitsubishi UFJ cut bad-loan provisions and charges by 63 percent during the quarter.
“Bad loan costs are trending down, helping to boost banks’ profits,” said Takehito Yamanaka, a Tokyo-based analyst at MF Global FXA Securities Ltd. before today’s earnings announcement. “I’m relatively bullish about Japan’s three big banks.”
Mitsubishi UFJ maintained its 400 billion yen profit target for this year and joined rivals Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. in posting improved earnings. Sumitomo Mitsui’s first quarter profit tripled to 211.8 billion yen, while Mizuho returned to profit after hedging losses a year earlier.
Tankan Survey
The government said on July 21 that the economy is “picking up steadily” after sentiment among the nation’s largest manufacturers rose to a two-year high in June, according to the Bank of Japan’s Tankan survey. Corporate bankruptcies fell by 19 percent last month from a year earlier, according to data from Tokyo Shoko Research Ltd.
Mitsubishi UFJ fell 0.9 percent to 429 yen on the Tokyo Stock Exchange before today’s earnings announcement. The shares have fallen 5.1 percent this year.
Bad-loan costs at Mitsubishi UFJ fell to 70.3 billion yen in the first quarter from 189.8 billion yen a year earlier. Bond trading income rose to 78.3 billion yen from 17.8 billion yen a year earlier.
While economic improvement has helped lower loan defaults and bad-loan provisions at Japanese banks, declines in domestic borrowing are forcing Mitsubishi UFJ and rivals including Sumitomo Mitsui to seek U.S. bank acquisitions for profit growth.
Japanese lending fell 2.1 percent, a seventh straight month, in June to a six-year low, according to the Bank of Japan, as companies issued more bonds and used available cash for growth.
U.S. Acquisitions
Mitsubishi UFJ may spend more than 500 billion yen to acquire more U.S. banks, Tatsuo Tanaka, deputy president of the group’s main banking unit said earlier this month. The bank’s San Francisco-based UnionBanCal Corp. unit acquired Washington- based Frontier Bank and California’s Tamalpais Bank in agreements with the Federal Deposit Insurance Corp. in April.
Mitsubishi UFJ raised 1.03 trillion yen in a stock sale in December to replenish capital as global regulators demand banks hold more capital.
“We’ll likely see a weak improvement in earnings at banks this year rather than a real recovery,” said Chikako Horiuchi, a Tokyo-based analyst with Fitch Ratings Ltd. “Bank forecasts aren’t that high and their lending business will remain weak.”
To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net;
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