Japanese bank MUFG's profit more than halves on credit-related costs

[TOKYO] Mitsubishi UFJ Financial Group (MUFG), Japan's largest lender by assets, said on Tuesday its first-quarter net profit more than halved as credit-related costs ballooned due to the coronavirus pandemic.

MUFG, which owns 24 per cent of Wall Street investment bank Morgan Stanley, reported a profit of 183.5 billion yen (S$2.38 billion) for the three-month period ended June 30, against 389.2 billion yen a year earlier.

The bank retained its full-year profit forecast of 550 billion yen. That compared with an average estimate of 594.1 billion yen from 10 analyst forecasts compiled by Refinitiv.

Japanese banks have been struggling with ultra-low interest rates for years, and the three major lenders - MUFG, Sumitomo Mitsui Financial Group and Mizuho Financial Group - have said credit-related costs this year would reach levels not seen since the global financial crisis.

Banks worldwide are dealing with surging credit costs due to the pandemic. Europe's biggest lender HSBC Holdings warned a day before its bad debt charges could blow past a previous estimate to US$13 billion this year.

MUFG's credit-related costs in the first quarter came in at 145 billion yen, while the lender's bottom line was buoyed in the same period last year by reversal of bad debt reserves.

The lender in May estimated 450 billion yen of credit-related costs for the current financial year.

In contrast, its net interest income, which is mainly derived from the traditional lending business, came in at 469.1 billion yen for the quarter, or a 5.6 per cent rise year on year.

Chief executive Hironori Kamezawa said last month the lender had provided about 12.5 trillion yen in loans and credit lines for virus-hit companies.

Peers SMFG and Mizuho reported last week their net profit for the quarter dropped 60 per cent and 24.6 per cent, respectively, due to a rise in credit-related costs.

REUTERS