Japan's MUFG third-quarter profit falls 6 percent on decline in gains from stock holdings

TOKYO (Reuters) - Mitsubishi UFJ Financial Group Inc (MUFG), Japan’s largest lender by assets, on Monday reported a 6.4 percent decline in net profit for the three months through December, after market volatility curbed gains in its stock holdings.

A man walks past a signboard of Mitsubishi UFJ Financial Group and MUFG Bank at its headquarters in Tokyo, Japan April 3, 2018. REUTERS/Toru Hanai

Profit reached 221.4 billion yen ($2.02 billion) versus 236.5 billion yen in the same period a year earlier, showed Reuters’ calculations based on nine-month cumulative figures disclosed in a stock exchange filing.

MUFG and its rivals continue to suffer from weak domestic lending as the central bank sticks to its prolonged monetary easing policy of keeping interest rates low to spur borrowing.

Banks have boosted profit in recent years by selling shares originally held to cement business ties with corporate clients.

The traditional practice of such cross-shareholding has been criticised for hampering corporate governance and exposing banks to market swings.

However, banks saw a drop in gains from such share sales in the last quarter as equity markets plunged with a Sino-U.S. trade war raising concern over the health of the global economy. In Japan, the benchmark Nikkei share price average suffered its first annual loss in seven years in 2018.

For the nine months through December, MUFG’s stock-related income including gains from selling part of its equity holdings, dropped 37 percent to 84.6 billion yen.

Higher expenses also ate into profit. MUFG’s proportion of expenses against revenue rose to 70.2 percent for the nine months from 67.3 percent a year earlier, as costs of overseas expansion and regulatory compliance weighed.

MUFG said it kept its profit view for the full year through March at 950 billion yen, down 4 percent from the year prior, and below the 992.5 billion yen average of 14 analyst estimates compiled by Refinitiv.

Last week, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc (SMFG) booked steep declines in third-quarter profit, as a global market slump late last year hit trading operations and sales of retail investment products.

At Mizuho, profit fell 68 percent - a figure impacted by a large gain a year earlier. Profit fell 27.5 percent at SMFG, and nearly 70 percent at subsidiary SMBC Nikko Securities Inc.

Nomura Holdings Inc, Japan’s biggest investment bank, posted its steepest quarterly loss in nearly 10 years.

Reporting by Taiga Uranaka; Editing by Christopher Cushing