Japan’s top lender MUFG expects profit fall after record year

By Makiko Yamazaki

TOKYO (Reuters) -Japan’s largest lender Mitsubishi UFJ Financial Group Inc (MUFG) said on Monday it expects a 12% drop in annual net profit due to market volatility and an uncertain economic outlook, after scoring a record profit for the previous year.

MUFG joins Sumitomo Mitsui Financial Group Inc (SMFG) and Mizuho Financial Group Inc, Japan’s No. 2 and No. 3 lenders respectively, in offering cautious outlooks.

“The (business) environment will remain uncertain and tough,” CEO Hironori Kamezawa told an earnings briefing, citing political risks and volatility in foreign exchange and interest rates.

“But we’ll strive to become a company that can stably earn a profit of one trillion yen ($7.74 billion) or more in line with our midterm strategy,” he said.

MUFG, which owns about 20% of Wall Street bank Morgan Stanley, said it expects one trillion yen in net income for the current business year, below analysts’ average forecast of 1.06 trillion yen.

The banking group expects credit-related costs in Japan to dip, as corporate bankruptcies in Japan have remained low thanks to government subsidies.

“But we will closely watch how the situation in Russia and a weaker yen impact on companies,” Kamezawa said.

For the previous year that ended in March 2022, MUFG posted a profit of 1.13 trillion yen, exceeding a previous record set seven years ago, thanks to the release of pandemic-related loan-loss provisions, gains in stock holdings and profits through its stake in Morgan Stanley.

However, the final quarter saw a 64.4% plunge in profit as MUFG set aside 140 billion yen to cover potential losses from its exposure to Russia.

That brought total Russian provisions by Japan’s top three banking groups to 312 billion yen.

MUFG also said it would buy back up to 300 billion yen, or 4.7% of its own shares.

($1 = 129.2800 yen)

(Reporting by Makiko Yamazaki; editing by Jason Neely and Susan Fenton)