MUFG’s Q1 profit more than halves on credit-linked costs

TOKYO: Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s largest lender by assets, said yesterday its first-quarter net profit more than halved as credit-related costs ballooned due to the Covid-19 pandemic.

MUFG, which owns 24% of Morgan Stanley, reported a profit of ¥183.5 billion (RM7.3 billion) for the threemonth period ended June 30, against ¥389.2 billion a year earlier.

The bank retained its full-year profit forecast of ¥550 billion. That compared with an average estimate of ¥594.1 billion from 10 analyst forecasts compiled by Refinitiv.

Japanese banks have been struggling with ultra-low interest rates for years, and the three major lenders – MUFG, Sumitomo Mitsui Financial

Group Inc and Mizuho Financial Group Inc – have said credit-related costs this year would reach levels not seen since the global financial crisis.

Banks worldwide are dealing with surging credit costs due to the pandemic. Europe’s biggest lender HSBC warned a day before its bad debt charges could blow past a previous estimate to US$13 billion (RM55 billion) this year.

MUFG’s credit-related costs in the first quarter came in at ¥145 billion, while the lender’s bottom line was buoyed in the same period last year by reversal of bad debt reserves.

The lender in May estimated ¥450 billion of credit-related costs for the current financial year.

In contrast, its net interest income, which is mainly derived from the traditional lending business, came in at ¥469.1 billion for the quarter, or a 5.6% rise year on year. – Reuters