Mitsubishi UFJ Returns to Profit as Japanese Banks Recover
July 31 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc.,Japan’s biggest bank by market value, posted its first quarterlyprofit in nine months as the financial crisis that led to morethan $1.5 trillion of writedowns and losses worldwide showedsigns of easing.
Net income rose to 75.9 billion yen ($797 million) for thethree months ended June 30 from 51.2 billion yen a year earlier,the Tokyo-based bank said in a statement today. Profit atMitsubishi UFJ, which invested $9 billion in Morgan Stanley lastOctober, was bolstered by rising lending income and a gain instockholdings.
Japan’s five largest banks reported improved results fromthe previous quarter, buoyed by rising stock markets and smallerbad-debt charges. Mitsubishi UFJ and smaller rivals SumitomoMitsui Financial Group Inc. and Mizuho Financial Group Inc. haveraised more than a combined $30 billion of capital this year,giving them added muscle to compete with foreign banks includingCitigroup Inc.
“There’s hope of a return to normality at banks globally,but they’ll be a little more curtailed with their capitalbase,” said Michael Wood-Martin, who helps oversee about $1billion at Henderson Global Investors in London. “The Japanesebanks have all done their financing and hopefully that’s the endof it.”
Mitsubishi UFJ shares rose 4.4 percent today in Tokyotrading before earnings were announced. The Topix Banks Indexadded 2.4 percent.
Nomura, Daiwa
Nomura Holdings Inc. and Daiwa Securities Group Inc.,Japan’s two largest brokerages, also returned to profit in thequarter. Their shifting fortunes mirrored those of overseasfirms including Goldman Sachs Group Inc., Deutsche Bank AG andCredit Suisse Group AG that posted profit that beat analysts’estimates, spurring optimism that the world economy is improving.
Japan’s gross domestic product probably grew by anannualized 2.4 percent in the quarter ended June 30, accordingto economists surveyed by Bloomberg, a turnaround from the firstquarter’s 14.2 percent contraction.
Mizuho said in May it expects bad-loan charges to fall to330 billion yen this year from 536.7 billion yen in the previous12 months as the government offers up to 30 trillion yen in loanguarantees to curtail bankruptcies.
Mitsubishi UFJ benefited from a 23 percent gain in Japan’sNikkei 225 Stock Average in the quarter after recording a 409billion yen loss on its shareholdings last fiscal year. Thevalue of its 21 percent stake in Morgan Stanley also rose as theU.S. bank’s stock jumped 25 percent.
“Mitsubishi UFJ has the best asset quality of the bigbanks,” Ismael Pili, a Tokyo-based analyst at Macquarie GroupLtd., said before today’s announcement. “If the banks decide tocrank up equity gains or come in with lower provisions, we seescope for higher profits.”
Mizuho’s Loss
Sumitomo Mitsui, the nation’s second-largest bank,yesterday reported a 72.8 billion yen profit as income from bondtrading rose and losses on stock investments declined. SumitomoMitsui is buying brokerage operations from Citigroup in Japanafter raising about 860 billion yen in a stock sale.
Mizuho Financial, the No. 3, fared worse. The bank todayposted an unexpected first-quarter loss of 4.5 billion yen ascredit costs jumped 16 times from a year earlier and it lostmoney on derivatives contracts.
Mitsubishi UFJ’s lending and interest income rose to 555.2billion yen from 470 billion yen a year earlier, bolstered byoverseas loans. Trading income almost doubled to 84.3 billionyen.
Bad-loan costs rose to 189.8 billion yen from 141.7 billionyen a year earlier, after Mitsubishi UFJ made consumer lenderAcom Co. a unit in October. From the previous quarter, creditcosts at the group’s banking units declined by 26 percent to73.3 billion yen.
To contact the reporter on this story:Finbarr Flynn in Tokyo at fflynn3@bloomberg.net
Last Updated: July 31, 2009 07:16 EDTSource: Bloomberg
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