MUFG boss: Trade war a concern

TOKYO: Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s l argest lender by assets, posted a lower quarterly profit and warned that the US-China trade war as well as growing market volatility would pressure its performance in the second half.

While MUFG raked in profit that was 200 billion yen ($1.75 billion) above its projections for April-September, it hiked its full-year view by only 100 billion yen — indicating it expects the first-half gains to be eroded in the coming months.

Its new annual net profit forecast of 950 billion yen is also slightly below an average estimate of 959.5 billion yen from 14 analysts surveyed by Refinitiv.

“US-China trade war and growing market volatility are among concerns for the months ahead,’’ MUFG CEO Nobuyuki Hirano said at a briefing. “We have to factor in these for the second half.”

For the first half, MUFG’s net profit rose 3.8% to 650.8 billion yen, helped by a hefty income from the release of bad loan provisions and gains from its equity holdings. But its earnings for the three months to September eased 0.6% to 335.8 billion yen, hurt by a weak domestic lending business.

Hirano said loan spreads continued to shrink, especially in lending for small- and medium-sized businesses as banks vie for borrowers amid weak demand.

The bank’s quarterly results were partly dragged down by its markets division, which booked large gains a year ago from selling its Japanese government bond holdings.

The division was also hit by a rise in US interest rates, which pushed down the value of its Treasury holdings.

Hirano noted that dollar-funding costs were rising as Japanese financial institutions flush with yen try to seek growth overseas. “MUFG cannot expand its balance sheet as it used to and needs to shuffle its overseas loan portfolio.’’

The bank also announced that it would buy back shares worth up to 100 billion yen, or 1.5% of its outstanding shares.

MUFG owns 24% of US bank Morgan Stanley and 77%% of Thailand’s Bank of Ayudhya PCL.