Japanese financial services firm Mitsubishi UFJ Financial Group Inc. (MTU) reported Wednesday that its consolidated net profit for the first half climbed 53.2% from last year, reflecting higher domestic and overseas lending income and lower expenses due to cost reduction initiatives. The company also backed its full-year net income forecast. Separately, Mitsubishi UFJ said it plans to issue up to 1 trillion yen of common stock through public offering in Japan.
Mitsubishi UFJ, together with Morgan Stanley, also announced further plans to integrate their securities operations in Japan through a joint venture structure involving two entities, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., and Morgan Stanley MUFG Securities Co., Ltd.
For the six-month period ended September 30, 2009, Mitsubishi UFJ's consolidated net income, under Japanese GAAP, was 140.95 billion yen, up from 92.02 billion yen in the previous year. On a per share basis, earnings were 11.08 yen, higher than 8.42 yen last year.
On a non-consolidated basis, the company recorded first-half net loss of 14.21 billion yen or 2.25 yen per basic share, compared to prior year's net income of 291.10 billion yen or 27.39 yen per basic share.
The company's consolidated ordinary income for the period declined 10.5% to 2.62 trillion yen from 2.93 trillion yen in the prior year period. Interest income was 1.50 trillion yen, lower than 1.84 trillion yen a year ago.
However, consolidated gross profits, before credit costs for trust accounts, rose to 1.81 trillion yen from last year's 1.70 trillion yen, mainly due to "higher domestic and overseas lending income, market product income and a consolidation of ACOM, despite of lower deposit income caused by the decline of interest rates." Net interest income increased to 1.12 trillion yen from 970.5 billion yen a year earlier. Net business profits was 751.7 billion yen, up from 623.8 billion yen last year. For the six months, ordinary profits grew 23.9% to 233.05 billion yen from 188.12 billion yen in the previous year.
First-half ordinary expenses declined to 2.39 trillion yen from 2.74 trillion yen in the previous year. General and administrative expenses also decreased in the six months due to an intensive corporate-wide cost reduction as well as the effect of the system integration.
On a non-consolidated basis, the company's operating income for the first half fell 42.2% to 143.20 billion yen from 247.86 billion yen last year. Ordinary profits were 116.84 billion yen, down 49.5% from prior year's 231.41 billion yen.
Looking ahead to fiscal year ending March 31, 2010, Mitsubishi UFJ said it still expects consolidated net income of 300 billion yen, compared to prior year's net loss of 256.9 billion yen.
For the year, Bank of Tokyo-Mitsubishi UFJ, Ltd. is expected to record net income of 245 billion yen, compared to last year's loss of 366.3 billion yen, and Mitsubishi UFJ Trust and Banking Corp. is projected to record net income of 45 billion yen, higher than 16.8 billion yen reported last year.
The company's consolidated ordinary profits for the year is projected to be 600 billion yen, significantly higher than last year's 82.8 billion yen.
In a separate statement, Mitsubishi UFJ announced that its Board of Directors resolved to file a shelf registration statement in Japan related to its plans to issue up to 1 trillion yen of common stock through public offering in Japan. Proceeds from any future issuances are expected to be provided to Bank of Tokyo-Mitsubishi UFJ, Ltd. to strengthen the overall group capital base. The effective period of the issue is within one year of the shelf registration becoming effective, from November 26, 2009 until November 25, 2010.
In addition, Mitsubishi UFJ, together with Morgan Stanley, announced further plans to integrate their securities operations in Japan. The companies said they are pursuing a joint venture structure involving two entities, such as Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., or MUMSS, and Morgan Stanley MUFG Securities Co., Ltd, or MSMS. The companies are now aiming to complete the transaction in May 2010, subject to execution of transaction.
MUMSS, which will be 60% owned by Mitsubishi and 40% owned by Morgan Stanley, is expected to include the wholesale and retail businesses of Mitsubishi UFJ Securities Co., Ltd. and the investment banking operations of Morgan Stanley Japan Securities Co., Ltd.
The entity will have five representative directors with Morgan Stanley designating its Chairman, and Mitsubishi designating its President and Chief Executive Officer. Mitsubishi will also name the Deputy President and Chief Executive Officer of the retail and middle markets business, as well as the Deputy President and Chief Executive Officer of the sales and trading business, while Morgan Stanley will designate the Deputy President and Chief Executive Officer of the investment banking business.
The second entity, MSMS, is expected to include the existing operations of Morgan Stanley Japan Securities, excluding the investment banking operations. In the entity, Mitsubishi and Morgan Stanley will have economic interests of 60% and 40%, respectively, while Morgan Stanley will have a 51% voting interest and MUFG will have 49%. The Chairman will be designated by Mitsubishi, and the President and Chief Executive Officer will be designated by Morgan Stanley.
According to the companies, the formation of the joint venture reflects recent trends in the global financial regulatory environment and in order to optimize the parties' ability to leverage their respective strengths and networks.
Commenting on the deal, Nobuo Kuroyanagi, president and chief executive officer of Mitsubishi, said, "We are pleased with the progress we are making in our global alliance with Morgan Stanley and, through the combination of these two securities companies, we are confident that we can provide the highest quality services to our customers in Japan."
John Mack, chairman and chief executive officer of Morgan Stanley, said, "We remain committed to our global alliance with MUFG and are very pleased with the level and quality of collaboration between our two organizations. James Gorman, our next CEO, and I look forward to working together through this joint venture in Japan to realize the attractive growth opportunities in this market."
MTU closed Tuesday's regular trading session at $5.48, up $0.10, on a volume of 2 million shares.
MS settled at $33.47 on Tuesday, down $0.76, on a volume of 14 million shares.
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