Mitsubishi UFJ Financial Group, Inc. — FY2022 Form 20-F
Reporting period: Fiscal year ended March 31, 2022; filed July 8, 2022. This is an annual report, not a standalone 2021 Q4 filing. Financial statements are prepared under U.S. GAAP unless otherwise indicated. Amounts below are yen.
Business context
MUFG is a diversified Japanese financial group spanning commercial and trust banking, securities, cards, consumer finance and asset management. Total assets were ¥367.65 trillion. Japan accounted for 67.1% of assets and 55.0% of interest and non-interest income. The group operated in more than 50 countries.
Key financial metrics
| Metric | FY2022 | FY2021 | Change / context |
|---|---|---|---|
| Interest income | ¥2,530.9bn | ¥2,752.0bn | Down 8.0% |
| Net interest income | ¥1,970.6bn | ¥2,004.1bn | Down 1.7%; net interest margin on average earning assets was 0.71%, versus 0.75% |
| Provision for credit losses | ¥278.0bn | ¥484.2bn | Down 42.6%, largely reflecting reversals tied to Union Bank assets reclassified as held for sale |
| Non-interest income | ¥1,394.8bn | ¥3,157.8bn | Down 55.8%; prior year included substantial equity-security gains |
| Non-interest expense | ¥3,146.1bn | ¥3,069.3bn | Up 2.5%, including ¥134.1bn impairment on assets held for sale |
| Net income (loss) attributable to MUFG | (¥83.3bn) | ¥1,117.3bn | Loss of ¥6.51 per basic share |
| Operating cash flow | ¥909.4bn | (¥245.1bn) | Investing cash flow ¥236.8bn; financing cash flow ¥5,385.0bn |
| Total assets | ¥367.65tn | ¥353.82tn | Up 3.9% |
| Loans, net of allowance | ¥111.68tn | ¥114.37tn | Down 2.4% |
| Deposits | ¥224.59tn | ¥229.21tn | Down 2.0%; includes Union Bank reclassification effects |
| Long-term debt | ¥34.70tn | ¥35.16tn | Down 1.3% |
| Total equity | ¥16.30tn | ¥16.24tn | Up 0.3%; equity/assets was 4.43% |
Material changes and capital/liquidity
- The net loss primarily reflected ¥824.4bn of trading-account losses and ¥119.0bn of investment-securities losses, compared with ¥1,458.3bn of investment-securities gains in FY2021. Trading losses were principally fair-value losses on securities as U.S. and European interest rates rose.
- Fees and commissions increased 8.6% to ¥1,658.9bn; equity-method earnings rose 22.7% to ¥436.6bn, including stronger Morgan Stanley earnings. Segment reporting and allocations changed in FY2022, with prior periods restated.
- Allowance for credit losses was ¥1.47tn, or 1.30% of loans, versus ¥1.35tn and 1.17% a year earlier. Net charge-offs were ¥179.3bn. MUFG recorded a ¥109.9bn qualitative reserve in the commercial portfolio related to Russia-Ukraine developments.
- Japanese regulatory capital ratios at March 31, 2022: CET1 11.06%, Tier 1 12.38%, and total capital 14.29%. External TLAC was 18.23% of risk-weighted assets against an 18.00% minimum. The ratios declined year over year; management said it remained compliant.
- Liquidity ratios were above minimums: consolidated LCR 170.4% and NSFR 132.4%, each against a 100% requirement. Deposits and equity funded 65.9% of average assets. The filing reports ¥138.1tn of uninsured deposits at March 31, 2022.
- MUFG paid ¥26 per common share in FY2022 dividends. It repurchased ¥150bn of shares during the year and cancelled 300 million treasury shares. A further buyback of up to ¥300bn was approved in May 2022.
Outlook, commentary and risks
- Management expected a gradual economic recovery as activity resumed but emphasized uncertainty from inflation, changing monetary policy, geopolitical conflict and sanctions, the pandemic, and uneven regional recovery. The three-year business plan runs through FY2024 and prioritizes digital transformation, sustainability, growth businesses, cost and risk-asset control, and portfolio reform. No specific consolidated earnings guidance is provided in the supplied filing text.
- MUFG agreed to sell MUFG Union Bank to U.S. Bancorp, excluding certain GCIB, Global Markets and shared-function businesses slated for transfer to MUFG Bank affiliates. Regulatory approvals remained pending; expected closing had shifted to the second half of calendar 2022. The held-for-sale disposal group included ¥11.62tn of assets and ¥11.16tn of liabilities; ¥134.1bn of impairment was recognized. Further losses could arise before closing.
- Key exposures include Japan’s low-rate environment, rising global rates and bond valuation losses, foreign-exchange and equity-price volatility, credit deterioration, foreign-currency funding and refinancing risk, climate-related risks, cyber and operational risk, and regulatory/legal actions. MUFG Union Bank was under a 2021 OCC consent order addressing information-security and technology/operational-risk deficiencies; remediation was ongoing. MUFG Bank’s U.S. branches also remained subject to an earlier AML consent order.
- Auditors gave unqualified opinions on the consolidated financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective at March 31, 2022.
Investor verification priorities
- Confirm the timing, approvals, transferred businesses, final consideration and total costs or gains/losses from the Union Bank transaction.
- Assess the sources of FY2022 market losses and the sensitivity of earnings and capital to further rate, equity and FX movements.
- Review credit-reserve assumptions and borrower exposures, especially commercial, Thailand, COVID-support loans and Russia-Ukraine-related reserves.
- Track capital and TLAC headroom against requirements, including the impact of Basel reforms and planned shareholder distributions.
- Verify the status of U.S. regulatory remediation and any developments in litigation, investigations or other contingencies.