Mitsubishi UFJ Leads Japan Megabanks Profit Surge on Stock Rally

Mitsubishi UFJ Financial Group Inc. led quarterly profit increases at Japan’s three megabanks as government stimulus plans spurred a stock market rally, easing losses on shareholdings and boosting fee income.

The country’s biggest lender by market value yesterday posted net income that doubled to 242 billion yen ($2.6 billion) in the three months ended Dec. 31 from a year earlier. Sumitomo Mitsui Financial Group Inc. earlier this week also doubled profit, putting it on track for a record annual income, and Mizuho Financial Group Inc.’s earnings jumped to 207.5 billion yen from 16.3 billion yen.

Prime Minister Shinzo Abe’s pledge to stimulate the economy has spurred a 30 percent jump in the Nikkei 225 Stock Average since elections were announced in mid-November. The banks are also benefiting from signs of a recovery in domestic lending with credit by city banks climbing for the first time in three years in December.

“Abe-nomics and rising equity prices were a tailwind for the big banks last quarter, cutting stockholding losses and boosting fees from mutual fund sales,” Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc., said. “Whether or not the banks’ profit growth is sustainable hinges partly on Japan’s monetary easing and economic stimulus.”

Losses Ease

Combined losses from shareholdings of the three banks narrowed to 265.7 billion yen in the nine months through Dec. 31 from 534 billion yen in the six months ended Sept. 30, based on lenders’ data.

Mitsubishi UFJ’s income from fees and commissions rose 8.5 percent to 244 billion yen, in the three months ended Dec. 31, offsetting a decline in lending profit to 433.5 billion yen, according to calculations based on yesterday’s statement. Profit from trading government bonds and other securities plunged 22 percent.

Shares of Mitsubishi UFJ slipped 1.2 percent to close at 515 yen in Tokyo ahead of the earnings announcement. The stock climbed 26 percent last quarter. The Nikkei 225 Stock Average rose 0.5 percent yesterday, capping a 12-week advance, the longest weekly winning streak since at least 1970.

Third-quarter results were calculated by subtracting first-half profit from nine-month figures reported to the Tokyo Stock Exchange. Quarterly net income beat the 238.5 billion yen average estimate of eight analysts surveyed by Bloomberg.

Year-Ago Gain

Profit for the nine months ended Dec. 31 dropped 35 percent to 532.5 billion yen, the company said in the statement. Mitsubishi UFJ maintained its profit target of 670 billion yen for the year ending March.

The decline in nine-month profit reflects a year-ago gain of 291 billion yen from converting its Morgan Stanley shares into common stock.

Japan’s economy, the world’s third largest, is showing recovery signs following two quarters of contraction. Industrial production rose the most in 18 months in December, government figures showed Dec. 31.

Loans outstanding at Japan’s city banks rose 0.3 percent in December, the first increase since October 2009, according to central bank data. Including regional banks, lending increased 1.4 percent.

Brokerage Rebounds

Mitsubishi UFJ’s profit growth was boosted by an earnings rebound at its brokerage business. Mitsubishi UFJ Securities Holdings Co. on Dec. 31 posted a profit of 10.1 billion yen last quarter, reversing a loss of 12.3 billion yen a year earlier.

Sumitomo Mitsui on Jan. 30 posted third-quarter net income of 219.4 billion yen, after the bank’s SMBC Nikko Securities Inc. unit rebounded to a profit in the period.

Lending income gained 9.1 percent in the quarter from a year earlier to 355.8 billion yen, according to Bloomberg calculations. Fees and commissions income rose 13.7 percent to 224.9 billion yen, and profit from trading government bonds and other securities more than doubled to 107.4 billion yen.

Mizuho’s surge in net income, reported on Jan. 31, was also boosted by a return to profit at its brokerage unit. The business posted a profit of 1.1 billion yen, compared with a loss of 36.7 billion yen.

Its lending profit rose 5.9 percent last quarter from a year earlier to 269.5 billion yen, according to calculations based on Mizuho’s statement. Income from fees and commissions surged 19 percent to 123.2 billion yen, while trading profit gained 13 percent to 92 billion yen.