By Atsuko Fukase
TOKYO--Japan's largest bank, Mitsubishi UFJ Financial Group
Inc., reported a record nine-month profit figure thanks to
operations in the U.S. and Thailand, showing how international
business can overcome thin margins at home for Japanese
lenders.
Among Japan's top three banks, MUFG was the only one to see
profit growth from a year earlier. It holds a stake of about 20% in
Morgan Stanley, the U.S. investment bank, and also owns San
Francisco-based Union Bank and Bank of Ayudhya in Thailand.
In the nine months through December, MUFG reported net income of
Yen927 billion ($7.9 billion), up 18% from a year earlier. Of that,
Yen97 billion came from the Morgan Stanley investment, Yen65
billion from Union Bank and Yen28 billion from Bank of Ayudhya.
Another plus was the weak yen, which increases the value in yen
of dollars earned overseas. MUFG said the yen's fall against the
dollar generated an additional pretax profit of about Yen50 billion
during the nine-month period. The bank gets about 40% of its profit
from outside Japan. Currently the dollar is trading at around
Yen117, up from Yen103 in April 2014 at the beginning of the bank's
fiscal year.
MUFG and the other two Japanese megabanks-- Sumitomo Mitsui
Financial Group Inc. and Mizuho Financial Group Inc.--have been
beefing up overseas operations in the face of poor growth prospects
at home.
Following the Bank of Japan's aggressive easing, the yield on
the benchmark 10-year Japanese government bond briefly dropped
below 0.2% in January before recovering Tuesday to 0.36%. Borrowing
rates are also low, meaning banks' profit margins are slim. In
addition, with many blue-chip corporations building up cash on
their balance sheets, demand for loans is weak.
Hoping to expand overseas in areas such as corporate lending and
project finance, SMFG bought a 40% stake in Indonesian lender PT
Bank Tabungan Pensiunan Nasional in two stages over the past two
years. It also bulked up its aircraft-leasing business abroad.
Mizuho was part of a group providing $45 billion to finance Actavis
PLC's planned purchase of U.S. drug maker Allergan Inc.
But overseas profits at the No. 2 and No. 3 banks weren't enough
to make up for domestic weakness. Last week, SMFG reported net
income of Yen682 billion, down 3.2% from a year earlier, and Mizuho
saw a 7% drop, posting Yen523 billion in net income.
Naoko Nemoto, an analyst at Standard & Poor's, said the
boost that banks are getting from their non-Japanese businesses may
not last. "There's uncertainty over several factors including
plunging oil prices and the European economy, which could weigh on
banks' overseas profits," she said. "Now is a turning point for
megabanks for profitability, and they may not be able to sustain
stable profits as they do now."
Write to Atsuko Fukase at atsuko.fukase@wsj.com
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