Mitsubishi UFJ Financial Group, Inc. Q2 FY2025 earnings call

• First half profits were a record high, with net operating profits and net income both setting new records.
• Profit drivers included strong customer segment performance and significant gains from the sale of equity holdings.
• Revised financial targets: net income raised to JPY1,750 billion, ordinary profit revised up by JPY350 billion.
• Shareholder returns: annual dividend forecast increased to JPY60, with up to JPY300 billion share buyback announced for FY'24.
• Progress on MTBP: Aiming to achieve an ROE of around 9% ahead of schedule this fiscal year and exceed 9%.
• Equity holdings reduction: Target for sale of equity holdings doubled to JPY700 billion, aiming to halve the book value of shares held over the current MTBP.

For the first half of FY'24, net operating profits (NOP) stood at JPY1,305.3 billion, an increase of JPY219.5 billion year-on-year, marking the third consecutive year of record high first half profits. Net income reached JPY1,258.1 billion, the highest since MUFG's establishment. Gross profits surged by $424.4 billion year-on-year. Net interest income and fee income grew steadily due to the yen interest rate hike, improved margins, and favorable performance in the fee business. G&A expenses increased by $204.8 billion year-on-year but the expense ratio improved to 55.1% due to successful expense controls. Total credit costs dropped by approximately JPY48 billion year-on-year in real terms.

• Revised net income target to JPY1,750 billion, up JPY250 billion from the initial target, driven by strong customer segment growth and gains from equity holdings sales.
• NOP target remains unchanged. Aim to achieve an ROE of around 9% ahead of schedule this fiscal year and exceed 9%.
• Raised annual dividend forecast to JPY60 and announced up to JPY300 billion share buyback for FY'24. Doubled the equity holdings sale target to JPY700 billion.

• Uncertainties in economic environment, including fluctuations in yen interest rates and foreign exchange rates.
• Impact of economic slowdown in Asia on overseas subsidiaries, affecting credit costs and business performance.
• Risks associated with equity holdings sales and their potential impact on future profitability.

Q: Ken Takamiya asked about the assessment of capital based on six announcements including financial forecast revision, equity holdings sale target, MTBP review, dividend increase, share buyback, and CET1 ratio.

A: Jun Togawa explained that financial performance was initially conservative but positive external factors and own measures led to profit increase. CET1 ratio was boosted by profit accumulation and FX impact, and remains within target range considering second half RWA and shareholder returns.

Q: Shinichiro Nakamura inquired about the CET1 ratio and NOP slowdown in the second half.

A: Jun Togawa explained CET1 ratio factors such as profit accumulation, FX impact, and second half RWA and shareholder returns. NOP difference between first and second half due to various factors like equity holdings sale gains and portfolio adjustments.

Q: Maoki Matsuno asked about foreign currency translation reserve increase and equity holdings sale pace.

A: Jun Togawa stated that FX fluctuations and accounting date changes caused the reserve increase. Equity holdings sale pace depends on agreements with customers, with FY'24 expected to be the largest reduction year.

Q: Takahiro Yano asked about overseas loan loss provision reversals and domestic lending demand.

A: Jun Togawa mentioned overseas NPL issues and domestic lending demand with focus on LBOs and MBOs, managing within credit regulations.

Q: Ken Matsuda asked about gain on sales of equity holdings and this year's earnings.

A: Jun Togawa said gain on sales contributed to profit revision, with part used for bond portfolio restructuring. Macro environment favorable, but focus on portfolio optimization.

Q: Koichi Niwa asked about equity holdings reduction and future MTBP.

A: Jun Togawa said current target is JPY700 billion reduction, with equity holdings aiming to be less than 20% of net assets during MTBP, but future MTBP will involve new business investments.