Mitsubishi UFJ Profit Jumps as Stock Rally Boosts Fee Income

Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, doubled its third-quarter profit as the country’s stock rally helped boost fee income and reduced its losses from shareholdings.

Net income jumped to 242 billion yen ($2.6 billion) in the three months ended Dec. 31 from 119.7 billion yen a year earlier. Quarterly earnings were calculated by subtracting first-half profit from nine-month figures reported in a statement today.

Mitsubishi UFJ joins Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. in posting higher quarterly earnings as Prime Minister Shinzo Abe’s pledge to stimulate the economy fueled the rebound in Japanese stocks. The bank’s lending income fell 7.8 percent even amid signs of a recovery in borrowing demand at home.

“We are witnessing signs of a fundamental recovery,” Toyoki Sameshima, a Tokyo-based analyst at BNP Paribas SA, said before today’s announcement. “Some of the banks’ impairment charges on equity holdings were erased and brokerage units’ earnings were helped by the stock rally.”

Third-quarter income from fees and commissions rose 8.5 percent to 244 billion yen, offsetting a decline in lending profit to 433.5 billion yen, according to calculations based on today’s statement. Profit from trading government bonds and other securities plunged 22 percent.

Earnings for the period beat the the 238.5 billion yen average estimate of eight analysts surveyed by Bloomberg.

Stock Rebound

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 today, capping a 12-week advance, the longest weekly winning streak since at least 1970.

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 yesterday.

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.

Overseas Expansion

The nation’s anemic demand for lending has spurred Mitsubishi UFJ, Sumitomo Mitsui and Mizuho to seek loan growth abroad through acquisitions.

Mitsubishi UFJ, a 22 percent stakeholder of Morgan Stanley and the owner of San Francisco-based UnionBanCal Corp., is now targeting additional acquisitions in the U.S., Takashi Morimura, deputy president at Bank of Tokyo-Mitsubishi UFJ Ltd., said in an interview last month.

The bank in December clinched a 15.5 trillion dong ($744 million) deal to buy a 20 percent stake in VietinBank, marking the biggest Japanese investment in a Vietnamese bank.

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.

Losses Ease

The bank’s losses from shareholdings eased to 90.9 billion yen in the nine months ended Dec. 31, from 173.6 billion yen in the six months through Sept. 30. The losses were 41 percent lower than 155 billion yen posted a year earlier, according to the statement.

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

Sumitomo Mitsui, Japan’s second-largest bank by market value, on Jan. 30 posted third-quarter net income of 219.4 billion yen, more than doubling from a year earlier and putting it on pace to post a record annual profit. The bank’s SMBC Nikko Securities Inc. unit rebounded to a profit in the period.

Mizuho, the third largest, yesterday said profit surged 207.5 billion yen last quarter from 16.3 billion yen a year, also helped by a return to profit at its brokerage unit.