MUFG(MUFG) - 2024 Q2 - Quarterly Report

TLAC and Capital Ratios - MUFG's external TLAC ratios as of September 30, 2023, were 20.44% on a risk-weighted assets basis and 10.09% on a total exposure basis, exceeding the required ratios of 18% and 6.75%, respectively[24] - MUFG issued $2.5 billion (¥374.0 billion), ¥255.0 billion, and €0.5 billion (¥79.0 billion) in TLAC-eligible senior debt during the six months ended September 30, 2023[21] - MUFG obtained ¥443.0 billion in Basel III-compliant perpetual subordinated Additional Tier 1 debt financing during the six months ended September 30, 2023, with additional issuances of ¥143.0 billion and $0.75 billion (¥112.3 billion) in October 2023[22] - The Common Equity Tier 1 capital ratio decreased to 9.78% as of September 30, 2023, from 9.89% as of March 31, 2023, due to an increase in risk-weighted assets[145] - MUFG Bank's consolidated Common Equity Tier 1 capital ratio was 9.78% as of September 30, 2023, slightly down from 9.89% as of March 31, 2023[148] - Mitsubishi UFJ Trust and Banking's consolidated Common Equity Tier 1 capital ratio decreased to 15.50% as of September 30, 2023, from 16.41% as of March 31, 2023[148] Acquisitions and Investments - MUFG Bank agreed to acquire 81% of PT Mandala Multifinance Tbk (MFIN) for approximately IDR7,042 billion (¥66 billion), making it the largest shareholder with 71% direct ownership upon completion[26] - MUFG Bank and ADMF plan to leverage MFIN's strengths to expand auto loan business in Indonesia, focusing on new motorbikes and multi-purpose loans secured by motorbikes[27] - MUFG Bank and Krungsri acquired HC Consumer Finance Philippines, Inc. for €468 million (¥61,605 million) in June 2023 and HC Home Credit Indonesia for €200 million (¥31,000 million) in October 2023[28] - Krungsri holds 75% of HC Philippines and 75% of HC Indonesia, while MUFG Bank holds 25% of HC Philippines and ADMF holds 9.83% of HC Indonesia[29] - MUFG Bank acquired 24,000,000 shares of U.S. Bancorp for $936 million (¥136.8 billion), increasing its total shareholding in USB to 4.39%[31] - Mitsubishi UFJ Trust and Banking Corporation plans to acquire 100% of Link Administration Holdings Limited for AUD 1,110 million, expected to complete from June 2024[35][37] Economic Indicators - Japan's real GDP improved by 0.9% for the quarter ended June 30, 2023, but contracted by 0.7% for the quarter ended September 30, 2023, reflecting stagnation in private consumption[8] - The U.S. real GDP improved by 2.1% for the quarter ended June 30, 2023, and by 4.9% for the quarter ended September 30, 2023, on a quarter-on-quarter annualized basis[10] - The Japanese yen depreciated against the U.S. dollar from ¥133.53 to ¥149.58 during the six months ended September 30, 2023, and has fluctuated between ¥140 and ¥152 since October 2023[15] - The Nikkei Stock Average increased from ¥28,041.48 on March 31, 2023, to ¥31,857.62 on September 30, 2023, and has fluctuated between ¥30,500 and ¥33,625 since October 2023[19] - The number of companies filing for legal bankruptcy in Japan between April 2023 and September 2023 increased by 34.7% to 4,208, while total liabilities decreased by 10.1% to ¥1,587 billion[9] - The Bank of Japan maintained its quantitative easing policy, targeting a 10-year Japanese government bond yield around 0% and a negative interest rate of -0.1% on Policy-Rate Balances[13] Financial Performance - Net income for the six months ended September 30, 2023, was ¥230.8 billion, a significant improvement from a net loss of ¥1,014.1 billion in the same period of the previous fiscal year[41] - Net interest income increased by 6.7% to ¥1,244.9 billion, driven by higher U.S. and Japanese interest rates and a depreciated Japanese yen against the U.S. dollar[42] - Provision for credit losses was ¥61.8 billion, primarily due to Krungsri's acquisition of consumer finance companies, including HC Philippines[43] - Non-interest income for the six months ended September 30, 2023, was ¥656.6 billion, compared to a non-interest loss of ¥973.8 billion in the same period of the previous fiscal year[43] - Non-interest expense decreased by 1.7% to ¥1,555.4 billion, mainly due to the absence of valuation adjustment losses related to the sale of MUFG Union Bank[44] - Total interest-earning assets decreased by 2.1% to ¥283,043.4 billion, while net interest income increased by 6.7% to ¥1,244.9 billion due to higher average interest rates[46] - Domestic interest income increased by 26.5% driven by higher average interest rates on loans, despite a 1.7% decrease in the average balance of domestic interest-earning assets[47] - Non-interest income improved significantly to ¥656.6 billion, primarily due to net investment securities gains and reduced net trading account losses[48] - Net foreign exchange losses increased to ¥329.1 billion, mainly due to the depreciation of the Japanese yen against major currencies and higher foreign exchange trading losses[49] - Trading account losses decreased by 31.2% to ¥940.7 billion, with a notable reduction in net losses on trading account securities excluding derivatives[51] - Fees and commissions income increased by 11.9% to ¥881.3 billion, driven by growth in credit card business (7.5%) and security-related services (23.6%)[48] - Investment securities gains surged by 250.7% to ¥743.4 billion, largely due to net gains from marketable equity securities[48] - Total assets grew by 1.5% to ¥398,147.3 billion, with non-interest-earning assets increasing by 11.4%[46] - Interest-bearing liabilities increased by 1.0% to ¥295,635.2 billion, with a significant 241.4% rise in interest expense on deposits[46] - Equity in earnings of equity method investees increased by 14.9% to ¥214.8 billion[48] - Net trading account losses for the current six-month period were smaller compared to the same period of the previous fiscal year, reflecting smaller net losses on trading account securities, excluding derivatives[57] - Net investment securities gains were ¥743.4 billion for the current six-month period, compared to net investment securities losses of ¥493.3 billion for the same period of the prior fiscal year[59] - Net equity in earnings of equity method investees for the current six-month period was ¥214.8 billion, compared to ¥186.9 billion for the same period of the prior fiscal year[60] - Non-interest expense decreased 1.7% mainly due to the absence of the previously recorded loss on valuation adjustment for loans held for sale and decreases in salaries and employee benefits and outsourcing expenses, including data processing[61] - Salaries and employee benefits decreased 5.4% mainly due to the sale of MUFG Union Bank[63] - Outsourcing expenses, including data processing, decreased 8.9% mainly as a result of the sale of MUFG Union Bank[64] - Fees and commissions expenses increased 17.2% mainly due to an increase in fees and commissions expenses related to the loan business and the business alliance arrangements at the company's securities subsidiaries[65] - Income (loss) before income tax expense (benefit) increased by 122.0% from ¥(1,291.7) billion to ¥284.3 billion[67] - Income tax expense (benefit) increased by 104.6% from ¥(340.3) billion to ¥15.8 billion[67] - The effective income tax rate decreased from 26.3% to 5.6%[67] - Net revenue for the six months ended September 30, 2023, increased to ¥2,504.5 billion, up from ¥2,344.9 billion in the same period in 2022[69] - Operating profit for the six months ended September 30, 2023, rose to ¥1,077.9 billion, compared to ¥889.6 billion in the same period in 2022[69] - Digital Service Business Group's operating profit increased by ¥3.5 billion, driven by higher consumer finance balance and credit card settlement volume[69][70] - Global Corporate & Investment Banking Business Group's operating profit increased by ¥0.3 billion, supported by higher deposit interest income and improved lending spreads[69][71] - Effective income tax rate for the six months ended September 30, 2022, was 26.3%, 4.3 percentage points lower than the statutory rate of 30.6%, due to an increase in valuation allowance against deferred tax assets[72] - Fixed assets as of September 30, 2023, amounted to ¥1,376.9 billion, slightly down from ¥1,422.4 billion in the same period in 2022[69][78] - Asset Management & Investor Services Business Group's net revenue primarily consists of fees from asset management and administration services, including pension trusts and mutual funds[79] - Global Commercial Banking Business Group's operating profit decreased due to the sale of MUFG Union Bank, but profits from Krungsri and Bank Danamon increased due to higher net interest income[78] - Japanese Corporate & Investment Banking Business Group's operating profit decreased by ¥0.6 billion, impacted by lower lending spreads and market conditions[69] - Increase in fixed assets for the six months ended September 30, 2023, was ¥114.0 billion, up from ¥87.2 billion in the same period in 2022[69] - Operating profit increased due to growth in non-interest income and interest income, driven by higher interest rates and improved lending spreads, partially offset by expenses related to the acquisition of an alternative investment company[80][82] - Total assets as of September 30, 2023, increased to ¥392,246.7 billion, up by ¥10,511.0 billion from March 31, 2023, primarily due to increases in trading account assets, net loans, and held-to-maturity debt securities[86] - Total loan balance as of September 30, 2023, increased by 3.7% compared to March 31, 2023, with foreign commercial loans growing by 9.0% and Krungsri loans by 12.4%[90][91] - The Krungsri segment recorded a provision for credit losses of ¥47.3 billion for the six months ended September 30, 2023, driven by the acquisition of consumer finance companies, including HC Philippines[98] - The Commercial segment saw a reversal of credit losses of ¥18.0 billion for the six months ended September 30, 2023, primarily related to a large borrower in the domestic manufacturing industry[97] - The ratio of loans classified as Under-Performing or below in the Krungsri segment increased to 11.29% as of September 30, 2023, from 10.98% as of March 31, 2023[98] - The ratio of allowance for credit losses to the total loan balance in the Commercial segment decreased to 0.67% as of September 30, 2023, from 0.74% as of March 31, 2023[97] - Loans to borrowers categorized as Close Watch in the Foreign Commercial segment increased by 25.0% as of September 30, 2023, compared to March 31, 2023[92] - The total balance of allowance for credit losses increased between March 31, 2023, and September 30, 2023, mainly due to provisions in the Krungsri segment[96] - The company applies the current expected credit loss model to estimate credit losses, reflecting expected credit losses and considering a broader range of information[100] - Total nonaccrual loans decreased by ¥61.7 billion between March 31, 2023 and September 30, 2023, primarily due to a decrease in the Commercial segment[111] - The percentage of available-for-sale Japanese government bonds to total investment securities decreased from 41.8% to 38.0% between March 31, 2023 and September 30, 2023[112] - The amortized cost of Japanese national government and Japanese government agency bonds decreased by 8.2%, while Japanese prefectural and municipal bonds decreased by 47.8%[115] - Marketable equity securities increased by 12.4% from ¥4,463.6 billion to ¥5,015.9 billion between March 31, 2023 and September 30, 2023[116] - Receivables under resale agreements increased by ¥2,311.4 billion to ¥16,370.4 billion as of September 30, 2023[117] - Total liabilities increased by ¥9,519.7 billion to ¥374,789.3 billion as of September 30, 2023, primarily due to an increase in deposits and trading account liabilities[118] - Net unrealized losses on available-for-sale debt securities increased, with Japanese national government and Japanese government agency bonds showing an 84.8% increase in net unrealized losses[119] - Deposits increased by ¥8,530.2 billion to ¥243,807.0 billion as of September 30, 2023, mainly due to an increase in overseas office deposits[122] - Trading account liabilities increased by ¥6,136.9 billion to ¥20,315.2 billion as of September 30, 2023, driven by interest rate and foreign exchange derivatives[126] - Long-term debt increased by ¥1,385.9 billion to ¥40,457.7 billion as of September 30, 2023, with unsubordinated and subordinated bonds contributing to the rise[127] - The average deposit balance increased to ¥240,208.1 billion for the current six-month period, up from ¥236,370.5 billion in the same period of the prior fiscal year[128] - Deposits exceeded loans before allowance for credit losses by ¥119,404.4 billion as of September 30, 2023, compared to ¥115,321.3 billion as of March 31, 2023[128] - The average balance of short-term borrowings for the current six-month period was ¥48,138.0 billion, while the average balance of long-term debt was ¥38,610.5 billion[129] - Total equity increased by 6.0% to ¥17,457.4 billion as of September 30, 2023, compared to ¥16,466.1 billion as of March 31, 2023[139] - MUFG's consolidated Liquidity Coverage Ratio (LCR) was 159.5% for the three months ended September 30, 2023, up from 152.2% for the three months ended March 31, 2023[152] - MUFG Bank's consolidated LCR was 172.2% for the three months ended September 30, 2023, compared to 162.5% for the three months ended March 31, 2023[152] - Mitsubishi UFJ Trust and Banking's consolidated LCR increased to 117.8% for the three months ended September 30, 2023, from 116.8% for the three months ended March 31, 2023[152] - MUFG's consolidated Net Stable Funding Ratio (NSFR) decreased from 132.8% on March 31, 2023, to 119.2% on September 30, 2023[156] - MUFG Bank's consolidated NSFR declined from 146.2% on March 31, 2023, to 132.8% on September 30, 2023[156] - Mitsubishi UFJ Morgan Stanley Securities' capital ratio decreased from 310.9% on March 31, 2023, to 258.7% on September 30, 2023, with capital accounts less fixed assets at ¥550.3 billion and ¥551.4 billion respectively[158] - Interest rate risk accounted for approximately 85% of MUFG's total non-trading activity market risks as of September 30, 2023[167] - The average daily interest rate VaR for MUFG was ¥602.2 billion in the six months ended September 30, 2023, with a peak of ¥701.5 billion and a low of ¥551.1 billion[167] - The proportion of Japanese yen interest rate VaR increased by 11 percentage points from 29% to 40% between March 31, 2023, and September 30, 2023[168] - MUFG's total assets increased from ¥381.7 trillion on March 31, 2023, to ¥392.2 trillion on September 30, 2023[172] - Loans, net of unearned income, increased from ¥119.96 trillion on March 31, 2023, to ¥124.40 trillion on September 30, 2023[172] - Investment securities holdings decreased slightly from ¥62.26 trillion on March 31, 2023, to ¥62.69 trillion on September 30, 2023[172] - The allowance for credit losses increased from ¥1.27 trillion on March 31, 2023, to ¥1.29 trillion on September 30, 2023[172] - Total deposits increased from ¥235,276,781 million in March 2023 to ¥243,806,967 million in September 2023, reflecting growth in both domestic and overseas offices[174] - Net interest income rose from ¥1,166,734 million in 2022 to ¥1,244,871 million in 2023, driven by higher interest income from loans and deposits[176] - Net income attributable to Mitsubishi UFJ Financial Group improved significantly from a loss of ¥1,014,129 million in 2022 to