Business context and reporting period
Mitsubishi UFJ Financial Group, Inc. (MUFG) filed this Form 20-F on July 24, 2023, reporting for the fiscal year ended March 31, 2023. It is an annual report, not a standalone 2022 Q4 filing; the figures below compare fiscal 2023 with fiscal 2022 unless stated otherwise. Financial statements are prepared under U.S. GAAP, while regulatory capital ratios use Japanese GAAP. MUFG is a diversified global financial group with ¥381.74 trillion in total assets and operations in more than 50 countries.
Key financial metrics
| Metric | FY ended March 31, 2023 | Prior comparable period |
|---|---|---|
| Total revenue (interest and non-interest income) | ¥6,306.8 billion | ¥3,925.7 billion |
| Net interest income | ¥2,389.4 billion | ¥1,970.6 billion |
| Provision for credit losses | ¥8.1 billion | ¥278.0 billion |
| Non-interest income | ¥1,695.4 billion | ¥1,394.8 billion |
| Non-interest expense | ¥3,420.0 billion | ¥3,146.1 billion |
| Income before tax | ¥656.7 billion | Loss of ¥58.7 billion |
| Net income attributable to MUFG | ¥599.9 billion | Loss of ¥83.3 billion |
| Basic EPS | ¥48.70 | Loss of ¥6.51 |
| Net interest margin / average interest-rate spread | 0.82% / 0.83% | 0.71% / 0.72% |
| ROA / ROE | 0.15% / 3.68% | (0.02)% / (0.51)% |
| Net cash from operating activities | ¥2,106.1 billion | ¥909.4 billion |
At March 31, 2023, total assets were ¥381.74 trillion, loans net of allowance were ¥118.68 trillion, deposits were ¥235.28 trillion, long-term debt was ¥39.07 trillion, and total equity was ¥16.47 trillion. The cash-flow statement reported investing outflows of ¥12.21 trillion, financing inflows of ¥11.98 trillion, and a net increase in cash and cash equivalents of ¥2.93 trillion; bank cash flows include substantial securities and funding movements.
Credit quality and liquidity indicators: allowance for credit losses was ¥1.27 trillion, or 1.06% of loans, versus 1.30% a year earlier; net charge-offs were ¥259.6 billion, or 0.21% of average loans. The consolidated liquidity coverage ratio was 152.2% and net stable funding ratio was 132.8%, both above the 100% minimum. MUFG’s Common Equity Tier 1 ratio was 10.76%, total capital ratio 13.91%, leverage ratio 4.70%, and external TLAC ratios 20.22% on a risk-weighted basis and 9.47% on a leverage-exposure basis.
Material changes versus prior period
- MUFG returned to profit from a fiscal 2022 loss. Net interest income rose 21.3%, principally on higher foreign loan and deposit yields as interest rates increased abroad. Domestic net interest income fell as higher funding costs outweighed increased interest income.
- Provision for credit losses fell sharply, mainly reflecting improved performance among some large domestic borrowers and a lower Russia-Ukraine-related qualitative reserve. This helped drive the year-over-year earnings recovery; it should not be assumed to recur.
- Non-interest income included a ¥558.0 billion pretax gain on the sale of MUFG Union Bank. The sale closed December 1, 2022; MUFG received ¥754.0 billion cash and about 3% of U.S. Bancorp, with a further ¥464.5 billion cash due within five years.
- The sale also involved substantial related charges: ¥282.5 billion loss on valuation adjustments for loans held for sale and ¥359.3 billion impairment losses on available-for-sale debt securities. A ¥134.1 billion prior-period impairment of assets held for sale was reversed in FY2023.
- Total assets rose 3.8% and deposits increased ¥10.7 trillion. Long-term debt increased ¥4.4 trillion; payables under repurchase agreements rose ¥12.4 trillion. Available-for-sale debt securities declined while held-to-maturity debt securities increased, reflecting portfolio rebalancing and bond purchases.
- MUFG repurchased and cancelled approximately 594 million shares for about ¥450 billion during FY2023. Cash dividends paid during the year were ¥30.50 per common share.
Outlook, management commentary, risks and unusual items
Management’s three-year Medium-Term Business Plan runs through the fiscal year ending March 31, 2024. Priorities include digital transformation, sustainability, growth in wealth management and Asia, global corporate and markets businesses, and cost, risk-weighted-asset and portfolio discipline. The filing provides no clear numerical FY2024 earnings guidance.
Management described a volatile environment: inflation and monetary tightening, the war in Ukraine, and instability in U.S. and European financial systems weighed on the global outlook, while Japan’s monetary policy kept domestic rates low. The yen’s depreciation increased translated foreign revenue; management estimated it added ¥609.7 billion to revenue and ¥133.6 billion to pretax income in FY2023.
Principal risks include credit deterioration, especially in commercial real estate and overseas consumer lending; interest-rate, bond-price, equity and foreign-exchange volatility; foreign-currency funding and liquidity pressures; and possible deposit outflows. Other material exposures include climate-transition and physical risks, cyber and operational incidents, regulatory investigations and sanctions compliance, and dependence on the Morgan Stanley alliance and earnings contribution. MUFG also disclosed limited Iran-related activity; associated FY2023 fee income was less than ¥5 million. Management said existing litigation and regulatory matters were not expected to materially affect results or financial position, while noting outcomes are uncertain.
Unusual accounting items include a 4.0% effective tax rate, well below the 30.6% statutory rate, chiefly because of nontaxable dividends and a reduction in deferred-tax valuation allowances. MUFG recorded ¥33.6 billion of goodwill impairment for First Sentier Investors following lower assets under management and revised cash-flow projections. The auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- How much of the earnings recovery reflects sustainable net interest income versus the Union Bank sale gain, unusually low credit-loss provision, and other one-time items.
- Whether credit costs rise as borrower support measures expire, particularly at Krungsri, where under-performing and non-performing loans increased.
- How bond portfolio losses, funding costs and interest-rate changes affect capital, earnings and liquidity; review the available-for-sale unrealized losses and securities classification.
- Completion and cash collection of the remaining ¥464.5 billion Union Bank sale consideration, and the performance and valuation of the U.S. Bancorp shares received.
- Progress against capital buffers and the plan’s FY2024 priorities, alongside the risks of planned acquisitions and the Morgan Stanley alliance.
- Confirm the reporting basis and period when comparing these annual figures with quarterly results: the filing is for the fiscal year ended March 31, 2023, not 2022 Q4.