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Mitsubishi UFJ's (MUFG) Q1 Earnings Increase Year Over Year
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Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for first-quarter fiscal 2025 (ended Jun 30) of ¥678.1 billion ($4.35 billion), up 21.8% year over year.
Increased gross profits, a rise in net interest income (NII), and net fees and commissions acted as tailwinds. Also, a rise in loan and deposit balances was positive. While a decline in net trading profit and a rise in credit costs acted as a spoilsport.
Gross Profits and G&A Expenses Increase
Gross profits (before credit costs for trust accounts) for the quarter under review were ¥1.54 trillion ($9.87 billion), up 19.2% year over year. The uptick was mainly driven by higher interest income from loans and a rise in fees related to the solution business and wealth management business. Also, the Merger and Acquisition activities outside of Japan, along with the Bank of Ayudhya Public Company Limited’s (“Krungsri”) impact of ¥163.5 billion led to the increase.
Results reflected a 40.9% increase in NII, which was ¥823.1 billion ($5.34 billion). Nonetheless, trust fees, along with net fees and commissions, totaled ¥483.1 billion ($3.1 billion), up 20.4%. Net trading profits (including net other operating profits) were ¥229.3 billion ($1.79 billion), down 10.3% year over year.
Mitsubishi UFJ’s total credit costs at the period end were ¥166.7 billion ($1.01 billion), up from ¥41.6 billion witnessed a year ago.
G&A expenses were ¥857.4 billion ($4.79 billion), which increased from ¥684.6 billion reported in the prior-year period.
The expense ratio was 55.8%, up from 55.1% in the prior-year period. A rise in this ratio indicates a decrease in profitability.
Balance Sheet Position Strong
As of Jun 30, 2024, Mitsubishi UFJ reported period-end loans of ¥122.7 trillion ($762 billion), up 5.1% sequentially.
Deposits rose 2% to ¥228.6 trillion ($1.42 trillion) as of Jun 30, 2024, compared with ¥224.04 trillion as of Mar 31, 2024.
Total assets were ¥407.3 trillion ($2.53 trillion), up nearly 1% on a sequential basis.
Changes in MUFG’s Reporting Segment
MUFG restructured its former Digital Service Business Group and Retail & Commercial Banking Business Group into Retail & Digital Business Group and Commercial Banking & Wealth Management Business Group. This change aimed at better leveraging strengths as a comprehensive financial services provider under the medium-term business plan, which was initiated in the three months ended Jun 30, 2024.
Beginning from the three months ended Jun 30, 2024, MUFG changed its strategy of allocating the net revenues and operational expenses among its reporting segments. In addition, the company also made adjustments in the calculation method for the operating profit (loss) of each reporting segment.
The business segment information for the last three months ending on Jun 30, 2023, is restated according to these new separation and calculation methods.
Our Viewpoint
MUFG’s strong liquidity position will keep supporting its organic growth strategies. The company remains focused on its business upgrade plans. However, high costs are likely to hurt the bottom line in the near term.
Mitsubishi UFJ Financial Group, Inc. Price, Consensus and EPS Surprise
Royal Bank of Canada's (RY - Free Report) second-quarter adjusted net income of C$4.2 billion ($3.09 billion) grew 11% from the prior-year quarter.
During the reported quarter, RY completed the previously announced deal to acquire HSBC Bank Canada for C$13.5 billion. Results were driven by higher revenues and loans and deposit balances. However, an increase in expenses and provisions acted as a headwind.
Barclays’ (BCS - Free Report) second-quarter 2024 net income attributable to ordinary equity holders of £1.24 billion ($1.56 billion) declined 7% year over year.
BCS recorded a rise in credit impairment charges, which hurt the results. However, an increase in revenues, a decline in operating expenses (showing the success of efficiency initiatives) and a solid balance sheet aided the results to some extent.
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Mitsubishi UFJ's (MUFG) Q1 Earnings Increase Year Over Year
Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) reported profits attributable to owners of the parent for first-quarter fiscal 2025 (ended Jun 30) of ¥678.1 billion ($4.35 billion), up 21.8% year over year.
Increased gross profits, a rise in net interest income (NII), and net fees and commissions acted as tailwinds. Also, a rise in loan and deposit balances was positive. While a decline in net trading profit and a rise in credit costs acted as a spoilsport.
Gross Profits and G&A Expenses Increase
Gross profits (before credit costs for trust accounts) for the quarter under review were ¥1.54 trillion ($9.87 billion), up 19.2% year over year. The uptick was mainly driven by higher interest income from loans and a rise in fees related to the solution business and wealth management business. Also, the Merger and Acquisition activities outside of Japan, along with the Bank of Ayudhya Public Company Limited’s (“Krungsri”) impact of ¥163.5 billion led to the increase.
Results reflected a 40.9% increase in NII, which was ¥823.1 billion ($5.34 billion). Nonetheless, trust fees, along with net fees and commissions, totaled ¥483.1 billion ($3.1 billion), up 20.4%. Net trading profits (including net other operating profits) were ¥229.3 billion ($1.79 billion), down 10.3% year over year.
Mitsubishi UFJ’s total credit costs at the period end were ¥166.7 billion ($1.01 billion), up from ¥41.6 billion witnessed a year ago.
G&A expenses were ¥857.4 billion ($4.79 billion), which increased from ¥684.6 billion reported in the prior-year period.
The expense ratio was 55.8%, up from 55.1% in the prior-year period. A rise in this ratio indicates a decrease in profitability.
Balance Sheet Position Strong
As of Jun 30, 2024, Mitsubishi UFJ reported period-end loans of ¥122.7 trillion ($762 billion), up 5.1% sequentially.
Deposits rose 2% to ¥228.6 trillion ($1.42 trillion) as of Jun 30, 2024, compared with ¥224.04 trillion as of Mar 31, 2024.
Total assets were ¥407.3 trillion ($2.53 trillion), up nearly 1% on a sequential basis.
Changes in MUFG’s Reporting Segment
MUFG restructured its former Digital Service Business Group and Retail & Commercial Banking Business Group into Retail & Digital Business Group and Commercial Banking & Wealth Management Business Group. This change aimed at better leveraging strengths as a comprehensive financial services provider under the medium-term business plan, which was initiated in the three months ended Jun 30, 2024.
Beginning from the three months ended Jun 30, 2024, MUFG changed its strategy of allocating the net revenues and operational expenses among its reporting segments. In addition, the company also made adjustments in the calculation method for the operating profit (loss) of each reporting segment.
The business segment information for the last three months ending on Jun 30, 2023, is restated according to these new separation and calculation methods.
Our Viewpoint
MUFG’s strong liquidity position will keep supporting its organic growth strategies. The company remains focused on its business upgrade plans. However, high costs are likely to hurt the bottom line in the near term.
Mitsubishi UFJ Financial Group, Inc. Price, Consensus and EPS Surprise
Mitsubishi UFJ Financial Group, Inc. price-consensus-eps-surprise-chart | Mitsubishi UFJ Financial Group, Inc. Quote
Mitsubishi UFJ currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Foreign Banks
Royal Bank of Canada's (RY - Free Report) second-quarter adjusted net income of C$4.2 billion ($3.09 billion) grew 11% from the prior-year quarter.
During the reported quarter, RY completed the previously announced deal to acquire HSBC Bank Canada for C$13.5 billion. Results were driven by higher revenues and loans and deposit balances. However, an increase in expenses and provisions acted as a headwind.
Barclays’ (BCS - Free Report) second-quarter 2024 net income attributable to ordinary equity holders of £1.24 billion ($1.56 billion) declined 7% year over year.
BCS recorded a rise in credit impairment charges, which hurt the results. However, an increase in revenues, a decline in operating expenses (showing the success of efficiency initiatives) and a solid balance sheet aided the results to some extent.