Mitsubishi UFJ Financial Group Inc (MUFG) 2026 Q2 法說會逐字稿

I am Kamezawa. Thank you very much for taking time out of your busy schedule today to attend our MUFG IR presentation. Mr. Togawa, CFO, explained the financial results at the online conference call the other day. So today, I would like to talk mainly about the progress of the medium-term business plan's targets. Please turn to page 6 of the material.

In the first half of FY25, net profits reached JPY1.2929 trillion, marking the third-consecutive year of record high profits for the first half. Progress towards the performance target of JPY2 trillion is 64.6%. I will explain the factors of the profit increase using the chart on the right.

During the first half, strong growth in the customer segment, interest income gain from last year's bond portfolio rebalancing, and an increase in equity in earnings of equity method investees, mainly Morgan Stanley, outweighed the impact of the changes in the equity method accounting date at Krungsri in Thailand and gain on sale of large equity holdings last year, resulting in a record high profit.

Please turn to page 7. The step chart on the right shows the factors of changes in NOP. Increase in loan and deposit interest income, thanks to rising yen interest rates and strong increase in fee income, both in Japan and overseas, boosted customer segment revenues, resulting in a steady increase in NOP.

Please turn to page 8. I will explain our current assessment of the impact of US trade policies and other factors. Currently, supply chain reorganization is ongoing in line with the progress in tariff negotiations, but there has been no significant decline in consumer sentiment so far, and the momentum for wage increases continues in Japan. While the initially concerned impact in May was partially avoided, uncertainties remain, including the continued possibility of excessive inflation and risk events seen in the US.

Furthermore, in Japan, we expect that the policies aimed at reviving Japan's growth to be implemented by the Takaichi administration will also change our business environment. Given these circumstances and the current levels of key financial indicators as detailed below, we adjusted our initial outlook for FF rate in March '26 downward, Nikkei stock average upward, and dollar yen rate to weaker yen.

Please turn to the next page. Taking into account the changes in the business environment and the progress of our financial results, we revised the target for net profits by JPY100 billion to JPY2.1 trillion. This represents a growth rate of over 10% from FY24 when we recorded a record-high profit.

Please turn to page 10 on shareholder returns. In line with our increased profit target, we are raising our full-year dividend forecast to JPY74, an increase of JPY10 year on year. We also resolved to repurchase our own shares up to JPY250 billion.

Share buybacks are expected to total JPY500 billion, a record high for the full year, with the total payout ratio of over 60%. We will continue striving to enhance shareholder returns while considering the optimal balance between solid equity capital and growth investment.

Please turn to page 11 on profit growth. If we achieve performance targets for FY25 based on our substantial earning power, excluding net gains and losses on equity securities, we will have achieved annual profit growth of approximately 20% for the past five years. In other words, we have steadily increased our earning power over five years and will continue to achieve solid profit growth even in an environment where gain on sale of equity holdings will gradually decrease.

Please turn to page 12. The strong profit growth I mentioned earlier is supported by fee income, which is one of our strengths. Over the past few years, we have strengthened our earning power by diversifying our business portfolio while responding to various changes in the business environment. During the first half of FY25, we continued to achieve steady growth primarily driven by domestic and overseas loan-related fees and trust business fees.

Please turn to page 13 on the path toward achieving the mid- to long-term ROE target announced in May. The assumptions are BOJ policy rate rising to around 1% and no gains from the sale of equity holdings as the reduction comes to an end. After completing the growth strategy outlined in the current MTBP, we will aim to achieve an ROE of around 12% by generating both organic and inorganic growth.

Regarding organic growth, first domestically, we will generate growth in Japan and capture the rising funding demand by providing high value-added services as well as fee-based revenues.

In our retail business, we will realize the outcome of various initiatives under the current MTBP and aim for double-digit ROE. And overseas, we will accelerate collaboration with partner banks and digital investees, including AscendMoney and Mynt, to strengthen MUFG's economic sphere and increase Asia business profit to 1.6 times. Furthermore, we will double fee income by globally expanding our O&D business, which is steadily building a track record centering on the US.

For inorganic growth, we will pursue acquisitions that are ROE accretive over the medium to long term, targeting AMIS, digital, and Asia US. Through these efforts, we aim to achieve corporate value on par with global top-tier companies.

Please turn to page 15. From here, I will explain the progress of the MTBP starting from the evolution of our growth strategies. In addition to the steady expansion of our domestic business, GCIB business centered on project finance and O&D also continued to progress resulting in approximately JPY200 billion increase in NOP vis-à-vis FY23. On the next page, I will elaborate on our Japan business and Asia and America's businesses where our measures are beginning to bear fruit under major changes in the environment.

Page 16 covers the progress of our domestic retail business strategy. In June this year, we launched our new service brand, M-tto. The accompanying credit card reward program has received a big response and is doubling card issuance year on year.

Furthermore, by rolling out various group-wide campaigns, we have significantly boosted not only new bank account openings, but also the performance of group companies such as online securities and robo-advisor. Leveraging the bank's strong customer base is driving the expansion of transactions across the group.

On the other hand, we believe that more strategic promotions are necessary to attract younger generation customers and enhance brand recognition. Towards the second half of the year, we will aim to further establish and penetrate the brand through simple appeal of the benefits of the linked accounts and services. In terms of functionality, we plan to release new services including a digital bank in FY26 and will also provide new experiential value through our recently announced strategic collaboration with OpenAI.

Page 17 covers domestic corporate lending and fee income. By leveraging the group's comprehensive capabilities and capturing funding needs arising from corporate actions, we have steadily increased our loan balance and improved our lending spread. Furthermore, fee income has outpaced the growth of the loan balance, achieving strong results, especially in high profitable areas such as M&A and real estate finance.

Page 18 is on the progress and future growth of our Americas business. As shown in the upper left graph, since the sale of Union Bank, we have concentrated our resources on the wholesale business and gross profit in the Americas is growing significantly, driven primarily by fee income. We expect the strong finance demand to continue going forward, driven by large scale investments in digital infrastructure, such as data centers and increased demand for M&A.

As shown on the right side, we will capture this demand by dramatically increasing activity levels in both asset origination and distribution. Our O&D business is steadily evolving with the number of lead left deals secured in leveraged finance in America's this fiscal year already increasing 3.5 times vis-à-vis FY24 and the composition of primary origination amount relative to loan balance outperforming overseas peers. We have already originated several large deals for AI data centers this fiscal year, and our pipeline is growing toward the second half. We will achieve further business expansion, primarily through fee income.

Please turn to the next page. In Asia, profits increased mainly in GCB domain. In Thailand, we are expanding our revenue base by increasing our large corporate lending and the effects of expense reduction measures are emerging.

In Indonesia, we are seeing a positive turnaround of auto loan balance and will accelerate this trend through the integration of Mandala and Adira Finance. We will work on both structural reform and strengthening our business foundation, aiming to capture the high growth potential of Asia.

In the corporate business, we are focusing especially on India, which is experiencing rapid growth within the region. In addition to establishing a securities subsidiary in September this year, collaboration with Morgan Stanley is progressing steadily, and we aim to continue achieving double-digit growth by firmly capturing the strong finance needs and active market trends.

Page 20 shows the progress of our efforts to resolve social issues. On the left, regarding sustainable society, there are different trends in sustainable investment globally, but our commitment remains unchanged, and we are steadily building up a track record focusing on renewable energy financing and green loans.

Furthermore, we will publish a white paper again this year to disseminate views that will contribute to accelerating the transition going forward. We will focus on industry-specific challenges and take a deep dive into the direction of initiatives by Japanese companies.

Right side shows our support of startups aimed at creating a vibrant society. We are expanding our investment base, including the establishment of a new fund focused on growth companies. Furthermore, we have launched initiatives such as promoting venture client model, where large corporates become customers of startups to create new value in reproducible ways and offering personal money trusts of space industry development. We are supporting startup growth not only financially but also by providing business support and expanding investor networks.

Please turn to page 21 on our AI and data strategy. We believe a world where AI is embedded in all products and services will arrive in the near future. To prepare for this world, companies must transform into AI-native organizations. We are implementing various initiatives to welcome AI as a member of our community and foster a corporate culture where humans and AI work together. We have already implemented AI in 116 use cases and aim to exceed 250 by FY26. The cumulative expected benefit during the current three-year MTBP period is approximately JPY30 billion.

We are also advancing the development of AI agents. As our first initiative, we are co-developing an AI credit expert with Sakana AI and have already begun operational validation at some branches. We have also begun a new strategic collaboration with OpenAI.

In addition to accelerating company-wide AI adoption, such as rolling out ChatGPT enterprise to all 35,000 MUFG bank employees, we are launching initiatives to create innovative customer experience in the retail business domain. We will introduce ChatGPT specifically for digital banking and expand various services.

As announced the other day, we also invested as the lead investor in Third Intelligence, a startup aiming to develop Japan-originated AGI. We are accelerating our efforts not only in the penetration and utilization of AI, but also in contributing to future technological advancement.

Please turn to the next page on our initiatives for digital assets. MUFG is aiming to utilize blockchain technology in a wide range of areas through group-wide efforts. In the payment area on the left, we will work to improve the speed and convenience of payments through our participation in global projects, such as a project to enhance cross-border payments using tokenized deposits, a joint stablecoin POC by three megabanks, and G-SIBs consortium on digital currencies.

On the right, in the area of security tokens, we are promoting the on-chain transition of assets, including real estate and bonds. In the real estate security token contracting business, Mitsubishi UFJ Trust and Banking is unrivaled with a market share of over 50%. In securities, we launched ASTOMO, a new mobile security token trading service for individual investors this October. Furthermore, we are steadily expanding the group's capabilities from structuring to sales, including issuing the banking industry's first publicly offered security token subordinated bonds by leveraging our trust and securities business functions.

Page 23 is on cost control. We will continue to invest resources necessary for future growth while controlling business enhancement expenses by ratio and infrastructure strengthening expenses by amount. Additionally, for infrastructure and system strengthening expenses, we set KPIs tailored to the characteristics of each business and measure the effectiveness. KPIs are established across all areas and monitored regularly, and the outcome of expense allocation in mass retail and generative AI are shown on the bottom right as an example. While making these investments for the future, we kept the expense ratio flat year on year.

Page 24 shows the status of RWA control. Although reductions were realized first due to the accelerated sale of equity holdings, we have made progress in capturing finance demand resulting from corporate actions and are currently accumulating high profitable assets steadily. We will continue to replace assets by maintaining tight discipline.

Page 25 shows the status of reduction of equity holdings. The cumulative amount sold as of the first half of FY25 was JPY339 billion on an acquisition cost basis, reaching approximately 50% of our JPY700 billion target. Including the remaining agreed but unsold balance, we have reached nearly 80% of our target.

Page 26 is on enhancement of our strategic alliance with Morgan Stanley. Collaboration is accelerating in investment banking, and we have recently realized several large-scale global projects. We are also beginning to see results from cross-selling our respective investment products in [AMIS] and further collaboration in private credit area. We have built a track record across various fields and Alliance 2.0 is steadily progressing.

Furthermore, personnel exchange and interaction have progressed significantly. Morgan Stanley employees with expertise visited not only the headquarters, but also multiple ranches for roundtable discussions to share know-how and hold discussions. By strengthening this unique and strategic partnership, we will deepen our collaboration and also work to further expand the scope of our collaboration.

That is all from me. In October 2025, MUFG celebrated its 20th anniversary. Over the past two decades, the environment surrounding us has undergone significant changes at an accelerating pace. Under such circumstances, we have continuously taken on challenges for various transformations, building a robust group foundation, strengthening our global presence, and in recent years, enhancing the resilience of our domestic business model, shifting from quantity to quality overseas, advancing AI and digitalization initiatives, and driving cultural reform. The support of our investors, rating agencies, customers, local communities, and all our stakeholders enabled our sustained growth to this point. So I would like to express my heartfelt gratitude.

Under the purpose of committed to empowering a brighter future, we will continue to embrace challenges, adapt to environmental changes, accelerate growth, and strive to further enhance shareholder value.

We sincerely ask you for your continued support.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.