MUFG posts best Q1 in seven years, helped by stock sale

TOKYO: Mitsubishi UFJ Financial Group reported the best first-quarter profit in seven years, helped by sales of equity holdings and gains from clawing back provisions that had been set aside in the past for potential bad loans.

Japan’s largest lender by assets said its net profit came in at 315 billion yen (US$2.82bil) for the quarter, up from 289 billion yen a year ago and the biggest since April-June in 2011.

The bottom line was buoyed by a hefty 62.3 billion yen gain from selling stocks of corporate clients.

Japanese banks, as a traditional business practice, pick up small stakes in corporate clients. But MUFG and its rivals have been trying to cut these holdings as the practice has come under criticism for amplifying banks’ risk exposure to market swings and hindering greater corporate governance at issuer companies.

MUFG also booked a 24.5 billion yen gain from clawing back provisions it had set aside in the past for potential bad loans as borrowers’ creditworthiness improved.

The bank had reported 20 billion yen in costs related to bad loans in the first quarter of the previous financial year.

The lender’s core banking operations, however, continued to be weak in the first quarter, dragged down by weak yen-bond trading and ultra-low interest rate environment under the Bank of Japan’s aggressive monetary easing.

MUFG saw an 18% drop in profits from its core banking operations in the quarter.

For the full year ending March, the bank kept its net profit forecast of 850 billion yen, down 14% from the previous year and below an average estimate of 926.2 billion yen from 13 analysts polled by Thomson Reuters I/B/ E/S. — Reuters