Japan’s leading bank MUFG predicts lower lending costs and better profitability

A MUFG Bank sign is seen in Tokyo, Japan on April 3, 2018. REUTERS / Toru Hanai

Japan’s leading lender Mitsubishi UFJ Financial Group Inc (MUFG) (8306.T) on Monday posted a 47% jump in better-than-expected annual profit and expects its credit costs to fall this year on expectations of a recovery in the COVID-19 pandemic.

MUFG’s credit cost forecast follows those of Sumitomo Mitsui Financial Group Inc (8316.T) and Mizuho Financial Group Inc (8411.T) which forecast a similar drop in credit costs last week this year, estimating that the The economy will recover as the vaccination progresses. . Read more

MUFG, which owns about 20% of Wall Street Bank Morgan Stanley (MSN), reported net income of 777 billion yen ($ 7.11 billion) in the most recent fiscal year ended in March.

As Japanese banks have seen an increase in lending since last year, as businesses rushed to borrow due to the COVID-19 pandemic, a prolonged low interest rate environment and shrinking population weighed on profits.

MUFG, like other major lenders, has sought growth outside of Japan. Last year, the bank announced it would invest $ 706 million in Southeast Asia’s largest rideshare company, Grab.

As part of its three-year business plan, MUFG said on Monday that it is targeting annual net income of more than 1 trillion yen by March 2024, and will put more emphasis on its business in Asia.

Its shares are up 34.3% year-to-date, the largest among Japanese mega-banks, and compared to the benchmark Nikkei’s 1.4% gain (.N225).

“While it is true that Asian markets will be our main source of profit, the impact of COVID-19 is also expected to remain in the region,” Managing Director Hironori Kamezawa said during an earnings update.

Profit might drop once, but will rise later, he said.

In the current fiscal year ending March 2022, the lender expects net profit of 850 billion yen, compared to 733 billion yen estimated by eight analysts. It predicts 350 billion yen in credit-related costs, up from 516 billion yen last year.

MUFG also said it would aim for net zero emissions in its financial portfolio by 2050 and in its own operations by 2030, amid pressure from governments to address climate change. Read more

(1 USD = 109.2200 yen)

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