The Pak Banker - - COMPANIES/BOSS -

Mit­subishi UFJ Fi­nan­cial Group Inc. led an in­crease in first-quar­ter profit at Ja­pan's big­gest banks as fee in­come and loans abroad surged. Com­bined net in­come at Mit­subishi UFJ, Su­mit­omo Mit­sui Fi­nan­cial Group Inc. and Mizuho Fi­nan­cial Group Inc. rose 12 per­cent from a year ear­lier to 703.7 bil­lion yen ($5.7 bil­lion) in the three months ended June 30, state­ments from the Tokyo-based lenders showed Fri­day. That's 30 per­cent of their com­bined full-year profit forecast.

Mit­subishi UFJ's loans abroad ex­ceeded its do­mes­tic cor­po­rate lend­ing for the first time as it lent more out­side the coun­try to make up for shrink­ing in­ter­est mar­gins at home. The banks are also reap­ing fees from Ja­panese who are in­vest­ing more of their sav­ings amid a stock-mar­ket boom. "Ja­panese banks are per­form­ing well," Akira Takai, an an­a­lyst at Daiwa Se­cu­ri­ties Group Inc. in Tokyo, said be­fore the re­sults. "Over­seas busi­ness will drive full-year re­sults above the banks' own es­ti­mates."

Mit­subishi UFJ's net in­come climbed 16 per­cent to 277.8 bil­lion yen, ex­ceed­ing the 253.8 bil­lion yen av­er­age es­ti­mate of six an­a­lysts sur­veyed by Bloomberg. Rev­enue at Ja­pan's largest bank jumped 20 per­cent to a record 1.56 tril­lion yen. Profit at Su­mit­omo Mit­sui, the na­tion's sec­ond-largest len­der by mar­ket value, un­ex­pect­edly climbed 16 per­cent to 267.9 bil­lion yen. Mizuho's net in­come rose 2.1 per­cent to 158 bil­lion yen, in line with an­a­lysts' es­ti­mates. Mit­subishi UFJ, which earned an un­prece­dented 1.03 tril­lion yen last year, main­tained its full-year profit tar­get at 950 bil­lion yen. Mizuho kept its forecast at 630 bil­lion yen and Su­mit­omo Mit­sui left its goal at 760 bil­lion yen.

"I can see Mit­subishi UFJ post­ing another record profit," Daiwa's Takai said. Shares of Mit­subishi UFJ closed 0.8 per­cent higher be­fore the re­sults, tak­ing this year's ad­vance to 35 per­cent, the best per­for­mance among the three banks. Mizuho is up 32 per­cent, while Su­mit­omo Mit­sui has climbed 27 per­cent, more than the bench­mark Topix in­dex's 18 per­cent gain.

Mit­subishi UFJ's av­er­age do­mes­tic in­ter­est-rate spread, a mea­sure of loan prof­itabil­ity, slipped by 8 ba­sis points year-on-year to 0.88 per­cent. In­ter­est rates have fallen amid the Bank of Ja­pan's un­prece­dented mon­e­tary eas­ing to stim­u­late the econ­omy and end de­fla­tion. "There is neg­a­tive pres­sure on spread," said Naoki Morimura, a Tokyo-based an­a­lyst at Fitch Rat­ings. "It's go­ing to be another year or two be­fore we see any im­prove­ment, so in­creas­ing the ab­so­lute amount of lend­ing is im­por­tant."

Com­bined net in­ter­est in­come, or rev­enue from lend­ing mi­nus pay­ments on de­posits, at the three so-called mega­banks rose 7.4 per­cent from a year ear­lier. Their in­come from fees and com­mis­sions in­creased 11 per­cent. Profit from trad­ing gov­ern­ment bonds and other se­cu­ri­ties gained 23 per­cent. Mit­subishi UFJ's over­seas loans swelled 25 per­cent from a year ear­lier to 42.4 tril­lion yen at the end of June, ex­ceed­ing its do­mes­tic cor­po­rate bal­ance of 42.2 tril­lion yen, ac­cord­ing to the bank's pre­sen­ta­tion ma­te­ri­als.

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