MITSUBISHI UFJ FINANCIAL GROUP INC Q3 FY2026 earnings call

20-Year Historical Transformation

• First phase (post-founding): Strengthened investment banking business via a 1 trillion yen strategic capital alliance with Morgan Stanley in 2008, which diversified MUFG's revenue structure and expanded its global investment banking footprint.
• Second phase: Expanded presence in ASEAN, starting with the acquisition of Bank of Ayudhya in Thailand in 2013, followed by investments in commercial banks in high-growth Vietnam, Philippines, and Indonesia to build out its Asian regional platform.
• Third phase (current): Business model transformation. Sold MUFG Union Bank (the former core of U.S. overseas business) in 2022, shifted from a scale-focused growth phase to a quality-focused growth phase, and increased investments in Asian digital financial players and asset management businesses.

Domestic Retail Strategy: Emutt Brand Expansion

• Launched the new cross-group retail service brand "Emutt" in June last year to integrate previously siloed group services, with the goal of expanding the domestic customer base by leveraging MUFG's core large banking customer base. Revamped the credit card point reward program to offer 7% cashback at 30 partner merchants (the largest in the industry), and a maximum 20% reward rate for customers who use multiple MUFG services, also an industry-leading level.
• Initial results: New bank account openings have increased, credit card issuance has doubled year-over-year, new online securities brokerage account openings have increased more than 11-fold, and new WealthNavi for Mitsubishi UFJ Bank account openings have doubled, expanding the customer base across all group companies.
• Upcoming Phase 2 rollout: Will implement a cross-business common ID, common Emutt Points, and a loyalty program that increases tier with usage volume; will also launch a digital bank and a digital inheritance platform that allows whole-family participation, offers preferential rates for shared family accounts, and simplifies inheritance procedures to intergenerationally retain customer loyalty.
• Upcoming Phase 3 rollout: Will integrate AI from OpenAI (with which MUFG signed a strategic collaboration agreement in November last year) to build an AI Concierge in the digital bank app that offers personalized support based on conversation and financial data, plus an AI chat for simplified Emutt service applications. Will also connect Emutt services to ChatGPT to enable natural personalized household management and investment advice within ChatGPT conversations.

U.S. Business and Morgan Stanley Alliance

• The U.S. business environment is expected to see continued strong loan demand driven by large-scale investment in digital infrastructure such as data centers and growing M&A demand, and MUFG continues to capture this demand with its leading project finance expertise and partnership with Morgan Stanley.
• The 15+ year strategic alliance with Morgan Stanley was upgraded to Alliance 2.0 in 2023: collaboration has accelerated in investment banking with multiple large closed global deals, mutual distribution of asset management products has begun to deliver results, collaboration in private credit is progressing, and wealth management is being expanded in Japan using Morgan Stanley's expertise. The Morgan Stanley CEO has reaffirmed that the partnership is permanent, and MUFG will continue to deepen collaboration.

Asian Expansion and India Investment

• In ASEAN, MUFG has invested in leading digital payment players including Thailand's Ascend Money (used by 7 out of 10 Thais) and Philippines' Mynt (used by 8 out of 10 Filipinos) to serve the large unbanked population in the region. MUFG projects that more than 100 million adult ASEAN residents will have some connection to MUFG within 10 years.
• In December last year, MUFG announced an investment in India's leading non-bank lender Shriram Finance, the second-largest retail non-bank in India by loan size, net profit, and market capitalization, which focuses on vehicle-collateralized business finance and commercial vehicle loans for small and micro transportation operators, with loan outstanding growing at an 18% annual average. India is expected to become the world's third-largest economy by 2030, and its overall lending market is expected to grow 6-fold over 15 years, with used commercial vehicle lending growing 12-15% annually. This investment gives MUFG a retail and small business footprint in India, completing a diversified regional portfolio covering Thailand, Indonesia, Philippines, Vietnam, and India, which will capture Asian growth and contribute to long-term ROE improvement.

Shareholder Value Improvement Initiatives

• MUFG pursues a disciplined capital management strategy, with proactive share repurchases that reduce equity (the denominator of ROE) and outstanding shares (the denominator of EPS), amplifying the ROE and EPS growth from underlying profit growth. Higher EPS directly increases dividend per share (tied to EPS via payout ratio) and supports share price growth (tied to EPS via PER).
• MUFG maintains a target payout ratio of around 40%: for 2025, the annual dividend forecast was raised to 74 yen per share, a 10 yen increase year-over-year and a 4 yen increase from the initial forecast, which is approximately 3x the 25 yen per share dividend in 2020, the fastest growth among Japanese megabanks.
• Share repurchases were increased by an additional 250 billion yen in the second half of 2025, bringing full-year repurchases to a record 500 billion yen. Total shareholder return (dividends plus repurchases) is expected to reach approximately 1.3 trillion yen, representing more than 60% of the 2.1 trillion yen full-year parent net profit target.

By geographic segment, MUFG's profit contribution is split as follows: 1) Japan: 44% of total profit. MUFG holds the largest domestic customer base in Japan, with 94 trillion yen in individual yen deposits. For the 2025 half-year period, yen-funded income has started to grow following the removal of negative interest rates, corporate loan demand remains strong, loan outstanding continues to grow steadily, and net interest margin is continuously improving. Fee income from corporate advisory and real estate full-value chain services is also growing. 2) United States: 30% of total profit. After the sale of MUFG Union Bank in 2022, U.S. wholesale business has continued to grow steadily, with gross profit growing significantly driven by fee income. Project finance business has held the top league table position in the Americas for 15 consecutive years. Morgan Stanley's profits are incorporated into MUFG's earnings as equity method investment gains, covering both corporate and individual business segments in the U.S. 3) Asia: 21% of total profit. Compared to 2013, profit from Asian business has grown approximately 5-fold. MUFG holds top-tier loan outstanding in the APAC region. In the 2025 half-year period, foreign currency-funded income has grown significantly driven by strategic investments in Asian commercial banks, and fee income has also continued to grow after 2021 driven by business quality improvements. For the full 2025 fiscal year half-year, MUFG's parent company net profit reached 1.3 trillion yen, marking the 3rd consecutive year of record half-year profit growth driven by higher yen-funded income from rising yen interest rates and steady fee income growth from its diversified portfolio.

• 2025 full-year parent net profit guidance was revised upward by 100 billion yen to 2.1 trillion yen, representing more than 10% year-over-year growth from the previous record full-year profit. Japan's policy rate has already risen faster than the assumption for this revised target, and the yen has remained depreciated; if strong performance in the customer segment and Morgan Stanley continues, there is upside potential to beat the 2.1 trillion yen target.
• The medium to long-term target ROE is maintained at 12%, set against the assumption that Japan's policy rate will rise to around 1%, policy shareholdings will be largely sold and one-time gains from share sales will disappear. MUFG expects to achieve this target via organic growth in Japan (targeting double-digit ROE in retail business by delivering on current mid-term plan initiatives, capturing growing loan demand and fee income), growth in Asia by building out the MUFG economic ecosystem via existing investments, fee business growth centered in the U.S., and inorganic growth focused on high-ROE asset management, high-growth digital segments in Asia and the U.S. that contribute to long-term ROE improvement.
• The 2025 full-year dividend guidance was raised to 74 yen per share, maintaining the 40% target payout ratio, and MUFG will continue to pursue steady progressive dividend growth driven by profit growth going forward.

• While some concerns from May (over U.S. trade policy impacts) have been partially resolved as tariff negotiations have progressed and supply chain restructuring has advanced with no significant drop in consumer sentiment and sustained wage growth momentum, lingering uncertainty remains: there is still risk of persistent excessive inflation, ongoing risk events in the U.S., rising geopolitical risk, and potential changes to Japan's business environment from new government policies.
• Profit growth from rising yen interest rates is a one-time transitional effect that will not continue indefinitely, and one-time gains from policy share sales will gradually decline over time, requiring MUFG to deliver on organic growth and investment gains to sustain 12% ROE in the long term.

Q: What is the impact of the December 2025 Japanese policy rate hike on MUFG's performance?

A: A 0.25% rate hike will have a gradual positive impact on profit, because fixed-rate loans will not immediately reprice higher, and the full impact will materialize over 3 years. For the remaining 3 months of the current fiscal year, the impact is limited to around 25 billion yen in additional profit, but by the third year after the hike, the total annual incremental profit will reach 180 billion yen. MUFG can potentially exceed this estimate by reallocating reserves held at the BOJ to Japanese government bonds and increasing loan volume, leveraging its position as Japan's largest private bank by balance sheet.

Q: What is the impact of the U.S. policy rate cut on MUFG's performance?

A: While lower U.S. rates will reduce net interest income from loans, it will also lower dollar funding costs for the treasury division. Overall, MUFG does not expect a large impact on group-wide profit compared to the impact from Japanese rate hikes.

Q: What is your outlook for Japanese and U.S. policy rates?

A: For Japan, MUFG expects the Bank of Japan will assess the impact of past rate hikes, government economic policy, wage trends after spring labor negotiations, and the spillover of U.S. trade policy before timing an additional rate hike this year. For the U.S., FOMC members have widely differing views on the pace of rate cuts given employment and inflation risks, and the current policy rate is already within the expected range of neutral rates. Inflation is expected to decline as the impact of tariffs fades, so MUFG expects rates will be held unchanged until the middle of this year, followed by rate cuts.

Q: What is the impact of exchange rate volatility on MUFG's performance?

A: A 1 yen depreciation of the yen against the dollar increases annual parent net profit by approximately 7.5 billion yen. The 2025 full-year profit target assumes an average dollar-yen rate in the mid-140 yen range; current rates are significantly more depreciated than this assumption, so if current levels hold through the end of March, this will be an upside factor for full-year profit.

Q: Why not raise the medium-term ROE target above 12%, since interim ROE already exceeded 12%?

A: Interim ROE of 12.5% benefited from strong core business, positive tailwinds from Japanese rate hikes, and one-time gains, so it is not representative of sustained long-term ROE. If MUFG hits the 2.1 trillion yen full-year 2025 parent net profit target, full-year ROE will be around 10%. The 12% medium-term target assumes no one-time gains from policy share sales (which currently temporarily boost ROE but will gradually decline going forward), and the positive impact from yen rate hikes will also not continue indefinitely. MUFG aims to deliver sustained 12% ROE via organic growth gains from current mid-term plan initiatives and contributions from past investments, and will pursue further growth after hitting this target. If Japanese policy rates rise above the assumed 1%, MUFG will capture the additional positive impact.

Q: What is MUFG's approach to digital assets?

A: MUFG is conducting joint proof-of-concept experiments with the other two Japanese megabanks and Mitsubishi Corporation on stablecoin issuance and improved cross-border remittance infrastructure. Beyond stablecoins, MUFG is working group-wide on a broad range of digital asset initiatives: it is a leader in blockchain-based security token offerings for assets including real estate and bonds, with Mitsubishi UFJ Trust Bank holding more than 50% market share in real estate security token trust services. In October last year, MUFG launched the retail digital securities service ASTOMO. These initiatives provide new funding opportunities for issuers and new investment opportunities for investors, and MUFG will continue to explore new digital business models including tokenization of MUFG-owned assets, crypto assets, stablecoins, and tokenized deposits to meet evolving customer demand.

Q: Are you prioritizing digital shift over physical branch networks?

A: Digital tools are now an essential part of financial infrastructure, so it is correct that MUFG is prioritizing digital initiatives like Emutt and a new digital bank, but digital and physical branches are complementary. Physical branches focus on delivering people-specific value: they meet demand for in-person consultation on major life events like asset management and inheritance, support elderly customers with how to use digital tools, and deliver added value that online-only banks cannot match via personalized, human-led consultation.

Q: What is the impact of the recent management top leadership changes?

A: The leadership changes are intended to accelerate MUFG's ongoing transformation and growth under new leadership, building on 20 years of change that has already transformed MUFG's business, profitability, and internal culture. The goal is to maximize organizational energy under new leadership to drive continued transformation and sustainable growth, building on MUFG's existing strengths of customer trust, customer network, and global group scale to build a more proactive, fast decision-making organization.

Q: What is MUFG's approach to supporting small and medium-sized enterprises (SMEs) and startups, and what is the outlook?

A: MUFG already provides tailored support across startup growth stages across the group, with total investment and lending commitments to domestic and global startups reaching 1.1 trillion yen via initiatives including investments in Asian digital startups and the MARS Growth Capital fund. Going forward, MUFG will accelerate support beyond just financing, leveraging its global domestic and international network to provide business matching and overseas expansion support to help startups increase their enterprise value.

Q: How is MUFG addressing Japan's aging population and declining birth rate?

A: As a global comprehensive financial group, MUFG has made contributing to Japan's asset management growth a core mid-term strategy. MUFG is strengthening its leading Japanese asset management and trust capabilities, providing professional client-centric advice and diverse solutions, and offering digital tools including the D-Canvas app for corporate defined contribution plan members and the Money Canvas app for general users to support asset accumulation, plus products focused on inheritance planning. MUFG also expanded financial education efforts, launching the dedicated "Manebi-ya" website in March 2025 to centralize educational content and simplify requests for school visits, and will continue to strengthen group-wide efforts to develop future generations of accumulators and support the creation of a comfortable society for all ages.

Q: Is MUFG's PBR, which already exceeds 1x, overvalued?

A: As of the end of December 2025, MUFG's PBR is 1.36x, the highest among Japanese banks, but it still lags behind global peer financial institutions, meaning there is still room for further upside. By continuing to increase ROE, raise profit levels, increase shareholder return capacity, MUFG expects to drive further PBR and share price growth, creating a positive cycle of value growth. MUFG sees significant remaining upside for its share price and is focused on driving continued growth to benefit shareholders.