Mitsubishi UFJ Financial Group, Inc. (MUFG) 2026 Q4 法說會逐字稿

I am Hanzawa and I assumed the role of Group CEO in April this year. Thank you 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 will focus on Group CEO's management policy and the progress of our MTBP, Medium-Term Business Plan.

Please turn to page 5. In FY25, net profits reached JPY2,427.2 billion, marking a record high for three consecutive years. Please look at the chart on the right. The main drivers of this profit growth were the steady increase in NOP, which reflects the underlying strength of our core business, and the rise in equity and earnings of equity method investees, primarily from Morgan Stanley.

Net profits increased by 30% as the absence of reversal of large loan loss provisions recorded in FY24 and decrease in gain on sale of equity holdings were offset by the rebound from loss on sale, mainly on foreign bonds in FY24 and other factors.

Please turn to page 6. The step chart on the right shows factors behind the changes in NOP. Increased loan and deposit interest income, capturing the rising yen interest rates, and higher domestic and overseas fee income are contributing to steady growth in our earning power.

Please turn to the next page, which shows our FY26 performance target. We have set net profits target at JPY2.7 trillion, which is an increase of over 10% from FY25 when we achieved a record high. Furthermore, as a financial target for the final year of the MTBP, we aim for ROE of approximately 12% in FY26.

As shown on the right, NOP, which reflects the strength of our core business, will continue to be the main driver of growth. While various risk factors are anticipated, including the current situation in the Middle East, none have materialized at this point and have not been factored into the assumptions of our plan.

Please turn to page 8. Regarding shareholder return, we will continue to aim for a dividend payout ratio of around 40% and a sustainable increase in DPS based on profit growth. Annual dividend in FY26 is expected at JPY96, an increase of JPY10 year on year. Regarding share repurchase, we resolved up to JPY100 billion for the first half, considering the trend of CET1 ratio. I will elaborate on FY26 capital allocation outlook on the next page.

Please turn to page 9. As of the end of March 2026, CET1 ratio was 9.2%, falling below the lower end of our target range of 9.5%. However, as profit levels have risen significantly over the past few years, our capital resilience is improving substantially, and we expect to return to the target range within this fiscal year.

Meanwhile, we expect the uptrend in loan to continue in FY26. We will consider a share repurchase in the second-half based on both the outlook for capital utilization to support growth and the progress of profit.

Next, let me explain CEO's management policy. Please turn to page 11. First, let me outline the business environment. The global business environment is undergoing significant changes, including reduced predictability due to the trade policies of various countries, the accelerated division of nations and economies, and rapid AI penetration.

Turning to Japan. Normalized interest rate environment is stabilizing, demand for asset building is increasing, and companies are expanding growth investment and accelerating corporate reorganization, driven in part by the advancement of corporate governance. In this environment, we aim to embody our purpose of committed to empowering a brighter future by capturing major global trends while anticipating short-term fluctuations.

Please turn to the next page on our basic policy. While maintaining the current management policy, I am committed to two key priorities as group CEO.

First is driving with growth aspiration. In this rapidly changing environment we will move beyond a structural reform mode and drive the evolution toward a growth aspiration mode that looks to the future. I do not think we have fully achieved this mode change yet. I believe our mission is for MUFG itself to enhance growth aspirations, stick to create MUFG's unique value, and empower the growth of Japan and the world.

Second is converting challenges into results. Thanks to initiatives from the previous MTBP, a culture of proactive challenge is taking root. While cherishing this culture, I intend to place even greater emphasis on achieving results and create growth together with society and our customers. Through these efforts, we will evolve from a leading financial institution in Japan to a leading global comprehensive services group and aim to establish a global top five position by market cap, a goal we set at MUFG's establishment.

Please turn to the next page on MUFG's target positioning. We revised our mid- to long-term ROE target in FY25, and we believe that achieving 12% ROE without gains from the sale of equity holdings is coming into sight. MUFG has kicked off discussions on the next MTBP, which will begin in FY27. In these discussions, we will explore the sustainable level of ROE to enable MUFG to achieve corporate value comparable to global top banks.

Please turn to the next page. To achieve corporate value comparable to global top-tier banks, sustainable mid- to long-term growth is essential. The key to this is our business portfolio mix. Business segments will follow varied growth curves.

In Japan, in the short-term, the largest customer base in the country will fully leverage rising policy interest rates to achieve high profit growth. Meanwhile, to drive mid- to long-term growth, we will reinforce business co-creation with our customers and further strengthen our financial, particularly our asset management functions, where MUFG holds a competitive advantage to contribute to Japan's renewed growth through both direct and indirect financial services.

In the Americas, we will capture high stable growth in the world's largest financial market by leveraging our strengths in investment banking and project finance and deepening our alliance with Morgan Stanley, a powerful partner.

In Asia, to capture both the high growth of individual countries in the medium to long term and the rapid growth of the digital sector. We will build economic sphere with our investee companies, generate synergies unique to MUFG, and make a significant profit contribution over the medium to long term. We will achieve sustainable profit growth through a well-balanced portfolio of these business areas. I will explain the strategic direction of each area from the next slide.

Please turn to page 15 on our domestic business. In the Corporate segment, upper left, we will deepen our risk-taking and proposal-making capabilities, work as unified group to provide high value-added services, and aim to increase profitability and scale.

In the Retail segment, upper right, initiatives under the Emut brand are progressing smoothly. The number of new account opening has increased by 50%, and the group's customer base is steadily expanding. We will firmly leverage this momentum for cross-selling to enhance profitability.

AM, IS on the lower half is MUFG's strength, and we believe it is the key to future growth. In Asset Management, we will strengthen our active management capabilities based on client needs and expand our investment capabilities, including private assets. In Investor Services, we will further expand our dominant domestic assets under administration, enter the untapped alternative fund administration business, and contribute to making Japan a leading asset management center.

Please turn to the next page on Americas business. As shown in the upper left, gross profit of the Americas business is driven by fee income and we are steadily increasing profit despite the fluctuations of the federal funds rate. The source of this growth is the O&D business.

Our product origination capabilities, including project finance, where we boast the number one position in the Americas, and our distribution capabilities that leverage our extensive network, are strengths unique to MUFG. Please look at the upper right. Going forward, we aim to double the fee income from O&D business. In origination, we will focus on acquiring active bookrunner deals to generate efficient fee income.

Our distribution capabilities, shown on the bottom right, have also improved significantly. We will accelerate asset turnover and aim to enhance our earning power without relying on the balance sheet. We are currently seeing an increase in AI data center deals. But 90% of large deals are sold down to investors, allowing us to balance high profitability with exposure control.

Please turn to the next page on our alliance with Morgan Stanley. Under a unique alliance unparalleled in the world, we have collaborated in various areas by leveraging each other's strengths. As shown in the top left, we will continue to accelerate collaboration in investment banking and commodities by leveraging each other's networks, further utilize Morgan Stanley's expertise in Japan, and strengthen both inbound and outbound investment product sales to create value that our competitors cannot provide.

Additionally, as shown in the top right, a key strength of this alliance is our ability to capture a broader range of US economic growth driven by Morgan Stanley's well-balanced portfolio. We will drive growth that is unique to this alliance, which is exceptional on a global scale.

Next is our Asia business. In April, we completed our investment in Shriram Finance and are now working to realize synergies through financing support, business collaboration, and knowledge sharing. Some of these efforts are already beginning to bear fruit, such as the improvement in the company's credit rating.

In India, boasting strong economic growth, we will achieve robust growth by leveraging the strengths of MUFG with its diverse capabilities and Shriram Finance, which is deeply rooted in the local market.

In Indonesia, we will integrate our Jakarta branch with Bank Danamon to establish ourselves as the fifth largest bank in the country. Through this integration, we aim to enhance management efficiency while combining our respective strengths to further improve profitability and scale our operations.

Additionally, we launched MUFG Unity, a new settlement solution connecting MUFG with our partner banks. We will create added value unique to MUFG and establish an MUFG economic sphere in Asia.

Please turn to page 21. From here, I will explain the progress of the MTBP, starting with the evolution of our growth strategy. In addition to the steady expansion of our domestic business, GCIB's business, centered on project finance and O&D, continued to progress, resulting in approximately JPY440 billion increase in NOP compared to FY23.

Page 22 is on the progress of our domestic retail business strategy. Following the launch of Emut and the rollout of functional updates and multiple campaigns, the number of retail customers turned around for the first time in eight years, and the number of customer referrals from MUBK with the largest customer base to group companies also increased significantly.

In Phase 2, the digital bank, a new online securities entity integrated within the group, will provide a highly convenient and rewarding asset-building experience through a unified UI/UX and tailored proposals powered by AI, thereby increasing transaction stickiness. In Phase 3 and beyond, we will leverage AI to dramatically improve convenience.

Furthermore, through the strategic alliance with Google announced recently, we will deploy MUFG's diverse financial functions within services that are deeply rooted in daily life. In this way, we aim to evolve Emut into finance seamlessly embedded in daily life with the goal of improving LTV.

Page 23 is on the progress of our initiatives aimed at addressing social issues. MUFG pursues both the resolution of social issues and the increase in economic value, thereby driving medium-to-long-term growth for all stakeholders. Under the current MTBP, we have implemented measures such as workshops and internal awards to encourage employees to take personal ownership of these initiatives. As a result, many employee-oriented initiatives have emerged.

The right side shows our progress toward realizing a sustainable society. Our recently published Transition Progress 2026 focuses on the progress of our transition plan. Specifically, regarding reductions in our financed emissions, we reviewed several interim targets and newly disclosed a five-year action plan as part of our roadmap toward net zero by 2050. Despite high uncertainty, we will continue to pursue decarbonization while balancing economic growth.

Please turn to page 24 on our AI strategy. On the left, the number of implemented AI use cases in our operations is outpacing our plans. The total investment amount during the current MTBP period is expected to reach approximately JPY70 billion, with expected benefit of nearly JPY40 billion.

Under agile organizational management, we are advancing flexible and speedy development, as shown in the examples of AI use cases on the bottom left, while simultaneously promoting group-wide initiatives to transform into an AI-native company, as shown on the upper right. In this way, by simultaneously advancing agile management and building culture, we aim to further accelerate the utilization of AI.

We are also making progress in our initiatives to deploy AI agents. Last fiscal year, we implemented Jinba, a general-purpose AI agent available across various domains, and introduced specialized AI credit experts at select locations. To advance business process transformation, we are building AI platforms and codifying tacit knowledge.

Page 25 is on cost control. Although cost has increased due to inflation and acquisitions, we continue to control business enhancement expenses by ratio and infrastructure strengthening and system expenses by amount. Furthermore, for infrastructure strengthening and system expenses, we have set individual KPIs, as shown in the lower left, to monitor the return on expenses. Furthermore, expense ratio, based on the initial assumptions of the MTBP, excluding the impact of rising interest rates, inflation, and FX, is below 60%, and we will continue to exercise discipline in managing these costs.

Page 26 shows the status of RWA control. While we achieved our RWA reduction target ahead of schedule, driven by the accelerated sale of equity holdings, high-profitability assets are steadily increasing thanks to factors such as funding needs associated with corporate actions. In FY26, while continuing to reduce low-profitability assets, we will capture growing funding demand in Japan and further accelerate our O&D business overseas. We will actively and selectively accumulate high-profitability assets that contribute to ROE improvement and enhance our corporate value.

Finally, reduction of equity holdings. As of the end of FY25, we had completed the sale of cumulative total of JPY441 billion based on acquisition cost, which is roughly 60% progress toward the MTBP target of JPY700 billion, and the ratio of holdings to net assets has fallen below 20%. Including the agreed but unsold amount, we have reached over 80% of the target and will continue to proceed with reductions to achieve the target.

That concludes my presentation. I ask for the continued understanding and support of our investors and rating agencies, and look forward to your continued support in the future.