November 14, 2017 / 7:47 AM / a year ago

UPDATE 1-MUFG Q2 profit jumps on smaller bad loan costs, stock sales

* Books gains from release of bad loan provisions for first half

* Sold more stocks held to cement ties with corporate clients

* Says to buy back own shares up to worth 100 billion yen (Recasts with quarterly figures, adds gains from stock sale, other details)

By Taiga Uranaka

TOKYO, Nov 14 (Reuters) - Mitsubishi UFJ Financial Group (MUFG) on Tuesday reported a 12 percent rise in quarterly net profit, as gains from selling equity holdings and smaller bad loan costs helped offset a weak lending business.

Japanese banks typically buy shares of corporate clients to cement ties, but this practice has come under pressure from investors and regulators who want lenders to trim such holdings worth billions of dollars and cut exposure to market swings.

MUFG, Japan’s largest lender by assets, said gains from its sale of stock holdings over April to September jumped to 55 billion yen ($483.98 million), from 44 billion yen a year ago.

MUFG’s net profit came in at 337.9 billion yen for the July-September period, versus 301.6 billion yen a year ago, Reuters calculations based on the bank’s six-month results show.

During its first-half, MUFG booked gains of 3.1 billion yen by clawing back provisions set aside in the past for bad loans, while it reported 57.6 billion in bad loan costs a year earlier.

Strong results at Morgan Stanley also lifted profits for MUFG, which owns about a fifth of the Wall Street bank.

But MUFG’s core lending business remained weak with net interest income, or profits from loan interests, falling over the first six months of the year.

MUFG and other Japanese banks have been hit by diminishing returns from lending under the Bank of Japan’s massive monetary easing, which has pushed down interest rates on mortgages, car loans and corporate borrowings.

For the full-year through March, the bank kept its net profit forecast of 950 billion yen, up 2.5 percent from the previous year but below an average estimate of 986.9 billion yen from 16 analysts polled by Thomson Reuters.

MUFG also announced it would buy back its shares worth up to 100 billion yen, or up to 1.5 percent of outstanding shares.

Earlier this week, No. 3 lender Mizuho Financial Group reported a 12 percent drop in quarterly profit, as ultra-low interest rates hurt income at its core banking business. ($1 = 113.6400 yen) (Reporting by Taiga Uranaka; Editing by Himani Sarkar)

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