MUFG reports first quarterly loss in a decade

TOKYO: Mitsubishi UFJ Financial Group Inc posted its first quarterly loss in a decade and cut its annual profit forecast after booking a hefty charge on its stake in an Indonesian bank.

Core lending business slumped in the quarter, underscoring the challenge for Hironori Kamezawa when he takes over from Kanetsugu Mike as chief executive officer in April.

Gains from sales of shareholdings and bonds weren’t enough to prop up earnings, and bad-loan costs ticked higher, fiscal third-quarter results showed yesterday.

Japan’s biggest bank had already flagged the 207.4 billion yen ($1.9 billion) charge on its stake in PT Bank Danamon Indonesia, which reflects a drop in the share price of the recently acquired lender.

Adding to the pain, it logged a 26.7 billion yen impairment on its US banking operations, where it has had to refinance mortgages after the Federal Reserve cut interest rates.

As a result, MUFG now expects fullyear profit of 750 billion yen, down from 900 billion yen targeted previously.

Lending profitability is under pressure as Japan heads into its fifth year of negative interest rates. Even so, MUFG’s rivals Sumitomo Mitsui Financial Group Inc and Mizuho Financial Group Inc eked out higher profit after seeing gains from lending income in the quarter, results showed last week.

MUFG said in December that it would book the writedown on its stake in Danamon during the quarter.

The need for a charge has been looming ever since it completed its takeover in April, which triggered a sharp retreat in the small portion of Danamon shares still traded on the open market as they were removed from MSCI Inc’s indexes.

The bank said it could cancel the charge at the end of March if Danamon shares recover. It hasn’t disclosed the level at which a reversal would apply, but analysts estimate it at around 4,700 rupiah per share.

Result highlights:

The 25.7 billion yen net loss for the three months ended Dec 31 compared with profit of 221.4 billion yen a year earlier, according to Bloomberg calculations based on nine-month figures released by the bank.

Nine-month net income totalled 584.3 billion yen, about 78% of the revised goal.

Gains on stock holdings totalled 35.8 billion yen, compared with a loss a year earlier.