Mitsubishi UFJ Financial Group Inc (MUFG) 2021 Q4 法說會逐字稿

Thank you very much for waiting everyone. We would now like to begin the net conference for Mitsubishi UFJ Financial Group on the fiscal year 2020 financial highlights. My name is Takahashi of the Investor Relations Office of the Financial Planning Division. I would like to serve as a moderate today.

Today, we will be hearing from Tetsuya Yonehana, our group CEO, for 15 minutes. And after that, it will be followed by Q&A. We are expecting to have this meeting for around 50 minutes. Before starting the explanation, I do have some housekeeping announcements to make. With respect to the information to be shared, it is based on the current forecast in speaking of the future outlook, therefore it accompanies risk and uncertainty. Please note that actual results may differ from the forecast.

We will now like to begin.

This is Yonehana speaking. Thank you very much for joining us today at this late hour for the MUFG net conference. Without further ado, I would like you to refer to the materials entitled financial highlights for fiscal year ended March 31, 2021. First, I would like to explain our financial results for fiscal year 2020 and then talk briefly about our new midterm business plan that will be launched this fiscal year.

Please proceed to Page 9. I would like to start with an overview of profit and loss. Gross profits, line 1 on the table on the left, increased by JPY 11.6 billion year-on-year. Although there was a decrease in revenue due to the spread of COVID-19, net interest income, line 2, increased by JPY 12.1 billion, and trust fees and net fees and commissions, in the third line, increased by JPY 3 billion year-on-year due to consolidation of the Bank Danamon in Indonesia and FSI, an asset management company based in Australia.

G&A expenses, line 6, decreased by JPY 52.3 billion. The first year-on-year decrease in 9 years due to our efforts to reduce and control expenses, both in Japan and overseas, despite the increase in expenses caused by the full year consolidation of Bank Danamon and FSI. As a result, net operating profit, line seven, increased by JPY 63.9 billion to JPY 1,248.4 billion, and the expense ratio, line 20, decreased to 68.7%.

Total credit costs, line 8, increased by JPY 292.5 billion year-on-year to JPY 515.5 billion due to the increase in global credit risk caused by the spread of COVID-19 as well as the introduction of new accounting standards at overseas subsidiaries. Costs were in line with expectations of the MTBP. Equity in earnings of equity method investees, line 12, increased by JPY 44.5 billion from the previous fiscal year, mainly due to the strong performance of Morgan Stanley.

Net extraordinary gains and losses, line 15, improved by JPY 394.5 billion due to the absence of extraordinary loss in association with the one-off amortization of goodwill recorded in the previous fiscal year. As a result, profits attributable to owners of parent, line 17, increased by JPY 248.8 billion from the previous fiscal year to JPY 777 billion. As shown in line 19, ROE was at 5.6% due to the impact of credit costs against the backdrop of COVID-19, regrettably falling short of the target of 7% to 8% in our MTBP.

The next page, Page 10, summarizes the impact of COVID-19 on our business performance. Please proceed to Page 11. The lower left graph shows the breakdown of changes in net operating profits year-on-year. The R&C business unit engaged in business of the domestic individuals and small and medium-sized companies and the JCIB business unit in charge of large Japanese companies, experienced a decrease in profit due to decline in business volume caused by the spread of COVID-19 and lower interest rates in the United States. Other business units, all secured higher profits and customer segment as a whole, posted an increase of JPY 32 billion year-on-year.

Please go to Page 12. This is a summary of the balance sheet. Loans are shown on line 3 and below. Line 5, domestic corporate loans increased by JPY 3.7 trillion from the end of the previous fiscal year. However, overseas loans decreased by JPY 5.1 trillion, resulting in an overall decrease of JPY 1.9 trillion. On the other hand, deposits, line 12, increased by JPY 24 trillion from the end of the previous fiscal year due to increase in both domestic and overseas deposits.

Page 13 shows the deposit and lending rates. The graph on the left shows changes in domestic deposit lending rates. As you can see in the second curve from the top, the difference in yield between the lending rate and deposit rate reversed in the fourth quarter, mainly due to an improvement in loan spreads. The graph on the right shows the changes in the overseas deposit lending rates. The bottom curve shows the difference between the yields on foreign currency deposits and loans of the commercial bank and trust banks combined, which increased mainly due to the decline in deposit rates.

Please turn to the next page, Page 14. Although risk-monitored loans increased from the end of the previous year, risk-monitored loan ratio is still low compared to the past.

Please refer to Page 15. This is the status of investor securities such as stocks and government bonds. Unrealized gains and losses is shown the table on the upper left, although foreign bonds, line 7, decreased due to rising interest rates. Total unrealized gains and losses on bonds, including domestic bonds, remained above JPY 200 billion. In addition, net valuation gains and losses in others, line 8, which includes investment in equities and hedges also improved.

Following Page 16, shows the status of capital adequacy. Common equity Tier 1 capital ratio was 11.9% on a finalized Basel III reform basis and 9.7%, excluding unrealized gains, continuing to maintain adequate levels.

Page 17, financial targets and dividend forecast for fiscal year 2021. We are forecasting a decline of JPY 150 billion for the net operating profit, line 1. Although we aim to increase profit in each business area, we expect a decrease in profit mainly and the overseas banking subsidiaries due to a decrease in loan outstanding caused by a decline in policy interest rates and the contraction in economic activity in fiscal 2020.

Global Markets business group expects an increase in stock-related business not included in net operating profits. Foreign exchange, based on strong yen, is also reflected.

The total credit cost, line 2, is expected to improve by approximately JPY 170 billion year-on-year. Despite the uncertainty caused by COVID-19, we expect improvement of the macroeconomic conditions in developed countries. In addition to these factors, we have also taken into account the improvement in retirement benefit expenses against the backdrop of rising stock prices and have set a target of JPY 850 billion in net income for fiscal year 2021, an increase over the previous year.

As for the dividend per share on the right, the year-end dividend for fiscal year 2021 will be JPY 12.5, as announced. And together with the interim dividend of JPY 12.5, the annual dividend will be JPY 25. For fiscal 2021, we have raised the dividend forecast by JPY 2 to JPY 27 per share, reflecting our intention of steadily increasing dividends in line with the goal of achieving JPY 1 trillion or more in net income and payout ratio of 40% in the fiscal year 2023. Further details will be given later.

That is all about the fiscal 2020 financial results. Could you go back to Page 4, new medium-term business plan that starts from this fiscal year? Details will be provided by Mr. Kamezawa, our group CEO, the day after tomorrow. So I would only like to touch upon highlights.

First, basic policy and key strategies. The impact from COVID pandemic, greater awareness of environmental and social issues and digital shifting the society together with advances in digital technology, amongst other factors, are leading to rapid changes in the business environment, surrounding our company at an unprecedented pace. The new midterm business plan correctly analyzes these changes in the society and positions the 3-year term as the 3 years of new challenges and transformation.

Based on this recognition, it was decided that our vision after 3 years is to be the premier business partner that pioneers future through the power of finance and digital services. As the society undergoes a huge change, we would like to be the power that helps advance customers in the world to the next level and move ahead. To make that happen, we will take on new challenges with a sense of speed, as key strategies, corporate transformation, strategy for growth and structural reforms are positioned as 3 pillars. We will build new business model to respond to the changes in environment, at the same time as we strive to enhance profitability and ROE.

Please turn to Page 5 on financial targets under the new midterm business plan to generate stable, high revenue and to improve capital efficiency. The biggest commitment is to achieving ROE. The target for ROE in fiscal '23 is set at 7.5%. Profits, expenses and risk-weighted assets are the 3 drivers to achieve targets. JPY 1.4 trillion of net operating profit and over JPY 1 trillion of profits attributable to owners of parent are the profit targets.

Expenses target is to be lower than fiscal 2020 level, excluding performance-linked expenses. Risk-weighted assets are to be maintained at the end of fiscal 2020 level, while profitability will be improved by replacing assets. Our aim is to become a financial group that generates profits attributable to owners of parent. With respect to CET1 ratio, financial soundness indicator, target is set between 9.5% to 10% to manage capital based on finalized Basel III reform basis, excluding net unrealized gains on available for sale securities.

Please turn to Page 6, showing plans for net operating profits. In each area of strategy for growth, 1 of the 3 pillars of key strategies, measures to strengthen earnings power will be steadily implemented to achieve JPY 150 billion in net operating profit increase. Further, JPY 100 billion will be added through reduction of expenses and development of new business under structural reforms.

Next page, Page 7, describes MUFG's strategy regarding transition to decarbonized society as our efforts to address the environmental and social issues. We believe that MUFG is able to achieve sustainable growth only when the society is sustainable. Thus we are addressing environmental and social challenges as an integral part of MUFG business strategy. MUFG considers the response to climate change, one of the most important management challenges and has supported customers' efforts to decarbonize while at the same time as we make efforts to decarbonize ourselves. To help achieve Paris Agreement, we issued MUFG carbon neutrality declaration and decided to join the United Nations led Net-Zero Banking Alliance, the first bank from Japan to do so. This page shows the overview of the strategy. To achieve net 0 greenhouse gas emission in our finance portfolio by 2050 and to achieve net 0 greenhouse gas emission in MUFG's own operations, we will strive to realize decarbonized society together with our customers.

That concludes my presentation. Thank you for your kind attention.

Thank you. We would now like to proceed to the Q&A. The floor is now open for questions.

Nomura Securities, Mr. Takamiya, please.

This is Takamiya of Nomura Securities. I have 2 questions. First question is please elaborate on the reversal of difference in yield between lending rate and deposit ratio for domestic and outlook going forward? The second point is to ask you to elaborate your capital policy, particularly excess capital. During the midterm business plan period, how will you utilize excess capital when the range of the capital target is exceeded based on the fact that RWA used to maintain as a promise? What is going to be the impact of the release of special treatment for investment in Morgan Stanley and other factors to maximizing commitment to ROE, capital management is important? Please elaborate further on this matter.

Thank you very much for the question, Takamiya-san. With respect to the reversal of the difference in yield between lending rate and deposit rate, please refer to the materials on Page 13. Third quarter was 0.72%. Fourth quarter was 0.75%. There was an increase of 0.03%. Let me give you the breakdown of the factors of the increase in 0.03%. 0.01% is the base rate and spread improvement is accounted for -- by 0.02%.

In terms of improvement of the spread, there are different factors that can be considered, for example, increasing high spread transactions, including capital finance. And from the past, we have been taking appropriate return for appropriate risk. It is a mixture of these efforts that is being implemented to improve spread.

Regarding the forecast going forward, for this midterm business plan period, we will continue to promote the risk-adjusted returns. This effort will be further promoted. To this point, inclusive of the coming 3 years, we will continue to improve the difference in yield between lending rate and deposit rate. That's the first point.

Second question is regarding the target for the common equity Tier 1 capital, CET1 capital. In terms of capital management, CET1 capital guideline, we have set a target of 9.5% to 10%, excluding the impact of net unrealized gains and losses on available for sale securities. 9.5% is based on a minimum capital requirement of 8.5% with strength buffer, minimum is set at 9.5%, plus 0.5%. That is the range in which we would like to manage. Recent past level is 9.7%. So currently, we are at the middle of the range.

The reason for we have range is related to Takamiya-san's question as well. In other words, what will we do when it exceeds 10% within the range with respect to dividend, as I have already mentioned, by the last year of the midterm business plan, in line with the earnings per share, we hope to gradually increase dividends going forward. Additional shareholder return will be contemplated within this range. Furthermore, when 10% is exceeded, proactive capital utilization will be considered. Specifically, in terms of strategic investment, this is something that we are always contemplating. And we will also consider the expansion of buyback as well. When 10% threshold is exceeded, specific capital utilization will be considered.

With respect to the 3-year capital management, maybe it is not a direct response, but I would like to emphasize that in aiming for ROE of 7.5%. We fully recognize the importance of capital management, which is the denominator in calculating the ROE. Therefore, effective utilization of this capital is important.

In terms of our numbers, I would like to further explain in the 3-year period, net income in total will be in the range of JPY 2.5 trillion to JPY 3 trillion. There will be the impact of the release of special treatment for investment in Morgan Stanley, which will continue until next year. Therefore, JPY 300 billion this year and the next fiscal year another JPY 300 billion, totaling JPY 600 billion. This will be used in the aforementioned JPY 2.5 trillion to JPY 3 trillion context.

Regarding dividends, forecast is JPY 27. Based on the current number of shares, it calculates to JPY 350 billion. This is what we will use to increase dividends further. For the remaining, we are assuming risk-weighted asset will be flat. Therefore, in this context, we will consider the utilization in order to reduce the denominator in the coming periods. Possible buyback will be a factor that we will consider. In that regard, this will be a very important 3 years.

Regarding the investment for growth going forward, there's something we are always contemplating. Domains in scope include digital, IT, global, AM and IS. However, significant investment of large scale, like we had during the last midterm business period is not likely in the next MTBP. Thank you.

We would now like to proceed to the second question, Mizuho Securities, Matsuno-san, please.

This is Matsuno of Mizuho Securities. I have 2 questions. First question overlaps with the Takamiya-san's question. It is regarding the capital policy for the MTBP period. According to Yonehana-san's explanation, in the last year of the MTBP, impact of double gearing will disappear. Therefore, suddenly, there will be an increase in excess capital in the last year. Are you considering front-loading to the preceding period, therefore, a possible share buyback? Please elaborate further in this context? Second question, is regarding capital policy this time. Why did you decide on JPY 2 increase in dividend over share buyback?

Matsuno-san, thank you very much for the question. Regarding your first question about the capital policy for the 3 years of the midterm business plan. As you have rightly mentioned, if we segment 3 years, year-by-year, the impact of the release of special treatment for investment in Morgan Stanley will occur in fiscal year '21, '22, but not in fiscal year 2023. And against this backdrop, we have set a range of 9.5% to 10%.

Front-loading of measures will be considered taking into consideration the amount of excess capital. Now -- so it will be on a case-by-case basis, and there is also a certain level of visibility. With respect to the impact of release of special treatment for investment in Morgan Stanley, there is visibility. And therefore, these factors will be taken into consideration.

Next, regarding the increase in dividend and share buyback for this fiscal year is the question that you have posed. To your first point regarding increasing dividend. In the last year of the midterm business plan, our goal is to achieve JPY 1 trillion in net income and 40% payout ratio. If we make a simple calculation based on the number of shares today and if we reach net income of JPY 1 trillion in fiscal year 2023, the resulting amount will be JPY 31 to JPY 32. It is our intention to gradually increase dividend to achieve this level. And that is the reason why guidance of JPY 2 increase in dividend was given this time.

With respect to the share buyback, taking the current stock price into consideration as well as the capital level, we believe that share buyback sufficiently falls within the scope of consideration. Against the backdrop of COVID-19, not being contained yet, we have taken a prudent decision because the COVID-19 situation has not changed from November of last year when we announced the interim results. So there is a lack of visibility in terms of the containment of COVID-19, and that is the reason why in the time frame of May, we have taken a prudent approach. Against this backdrop, we will also take into consideration the continuing COVID-19 situation and to consider the possibility of share buyback. That's all.

We would now proceed to the third question. Daiwa Securities, Takai-san, please.

This is Takai of Daiwa Securities. I just have 1 question. Regarding the financial target for this fiscal year, you tend to be conservative in your guidance in the past. From that standpoint, I would like to ask questions about the financial targets of net operating profit to JPY 1.1 trillion, a total credit cost of JPY 350 billion and consolidated net profit JPY 850 billion. In terms of the net operating profit, credit cost and net profits, please elaborate further on this guidance in terms of latitude, whether it is conservative, likelihood and whether it is a stretch target. Please elaborate further.

Thank you for your question. Regarding the financial targets for fiscal year 2021 is the question posed. Let me talk about the breakdown of these numbers. Starting off with net operating profit JPY 1.1 trillion. This compares to JPY 1.248 trillion in fiscal year 2020, which is a decline by JPY 150 billion. Let me explain the breakdown of the decline of the JPY 150 billion. First, the GCB business group is assuming a decline in profit of JPY 50 billion, centering on the ASEAN nations. This is reflecting the impact in consumption and consumer-related business. The impact was very strong in fiscal year 2020. The outstanding balance has declined in the consumer business as well as the auto loan business. This decline in fiscal year 2020 is reflected in fiscal year 2021.

The policy rate is declining, which occurred in fiscal year 2020, but there will also be a full year impact for fiscal year 2021, assuming a decline of JPY 50 billion. There are also technical factors, assuming JPY 105 for foreign exchange, resulting in deterioration of JPY 20 billion.

Credit valuation adjustment, CVA was JPY 35 billion in fiscal year 2020. This is soon to be 0. Therefore, it will be absent in this fiscal year. In terms of the global market business division, for fiscal year 2021, in treasury, there is an initiative to provide capital using stock, meaning that corresponding business revenue will decline. The impact thereof is JPY 50 billion. Altogether, it amounts to JPY 150 billion.

With respect to likelihood. In presenting our guidance, a rounded off the financial target was provided. That is how I would like to respond to your question. Next, total credit cost of JPY 350 billion. Forecast of total credit cards for fiscal year 2021 is extremely difficult. It was difficult in fiscal year 2020 as well because of the start of the COVID-19 impact. By the same token, it is difficult for fiscal year 2021 as well. So there is a range that we have set. Therefore, individual companies factors will have a strong impact. On our part, we have forecast represent -- our forecast represents the upper end of this range. Those are the 2 major items, and the result is JPY 150 billion.

Proceeding to the fourth question is Nishihara-san from JPMorgan Securities.

My name is Nishihara of JPMorgan. I have 2 questions. First question is regarding the midterm business plan. This includes structural reform cost. Our plan shows a reduction of JPY 100 billion in terms of costs. Three years ago, a plan was presented showing a reduction of JPY 110 billion over 6 years. How much of the JPY 110 billion have been concluded in the past 3 years? And what is incremental in the current 3-year period?

When President Kamezawa took the helm, he talked about the rebuilding of headquarters as well as increasing speed of cost reduction. And President Kamezawa also spoke of the need of reducing costs with intention 6 months ago. With respect to the past plan, please talk about the actual and how much will be incremental?

Second question is regarding the growth strategy for Page 6. Top line growth of JPY 150 billion is shown here. Three pillars here are GCIB, markets and solutions, wealth management. GCIB and Global Markets generated high profits in the past year on the back of the strong performance of DCM and capital markets. What about the 3 years going forward? What kind of business will generate such a significant profit? So please elaborate on GCIB solutions and wealth management.

Thank you for your questions. First, to respond to the question on expenses. In the previous midterm plan, the target was to grow net operating profit by JPY 250 billion, and the target for expenses was a reduction of JPY 50 billion. This JPY 50 billion of expense target was achieved in the previous medium term. Under the new midterm plan, there is around JPY 100 billion of structural reforms. I apologize that the graph is not easy to grasp, but in the JPY 100 billion of structural reforms, domestic expenses, overseas expenses and new business are included. Domestic and overseas expenses combined are approximately JPY 80 billion. The target is to reduce this amount. In the meantime, the amount for strategy for growth is around JPY 150 billion. This graph is based on net operating profit. The reduction of expenses is based not only on gross profit, but on net operating profit basis.

As for the reduction of JPY 80 billion of domestic and overseas expenses, in Japan, we plan to achieve JPY 80 billion reduction with personnel cost and facilities. Overseas, personnel costs and regulatory costs are expected to come down. If I may further add about the expenses, starting under the new midterm plan, expenses are classified into 3 types, and we made plans accordingly and we'll monitor and disclose them accordingly. The first of the 3 is the performance-linked expenses. This is an expense that is automatically incurred in line with the gross profits. Excluding this performance-linked expenses, we plan to reduce other expenses in the 3 years under the medium-term business plan. The remaining 2 are called expenses, base expenses and expenses for growth. Base expenses will be reduced so that they can be reallocated to growth expenses. And on a net basis, we plan to reduce expenses. So this is in a way the growth investment, including investment or the wealth management, on which I will elaborate later.

If I may add some more regarding the strategy for growth. First, with respect to the wealth management, we will leverage the strength of MUFG's group-wide capabilities of having bank, trust bank and securities to expand businesses related to estate planning and real estate and to strengthen asset management business. We will also strengthen the organization by doubling the number of specialists and by assigning relationship managers for long-term coverage. These are the approaches we will be taking.

Secondly, business issue solution type of approach is for JCIB focusing on large Japanese corporate customers. In this regard, our target is to raise ROE. And to achieve this, we need to improve the spread by accurately identifying risk reward, which is related to the earlier question. We will support customers proactively as 1 unified group to help customers address changes in industrial structure and social issues. Through this, we will create businesses and generate revenue. We would like to consider offering new solutions, including investment in joint businesses.

Lastly, about GCIB and global markets. Continuing from the last midterm plan, we will promote transformation of business model to shift from volume growth to quality enhancement. In terms of strategy, as a part of efforts to optimize portfolio, there will be some shift through transactions with institutional investors in risk-weighted asset allocation to grow revenue, including fee revenue. Integrated management with global markets business group underway from the previous midterm plan will be further strengthened. Common KPI will be established, including KPI based on return on equity. Did that answer your question?

Then we would like to take the fifth question, Mr. Sato from SMBC Nikko Securities, please.

This is Sato from SMBC Nikko Securities. I have 2 questions. The first is a follow-up question on increasing dividend and share buyback. How do you think the regulatory side is distinguishing the dividend increase and share buyback? Generally speaking, dividend may show some downward rigidity. I do realize that my organization's parent bank is doing something similar, and I hesitate to ask this question, but I would like to hear your view on this.

The second question is on the breakdown of the credit cost of JPY 350 billion. On a nonconsolidated basis or for 3 overseas banks and for others, if you could give a rough indication of the breakdown. For example, you might be able to say that on a nonconsolidated basis, there was a large provisioning in the fourth quarter. So it will not be large this term. Could you give some indication of the breakdown of the credit cost?

Thank you for those questions, Mr. Sato. To answer the first question, to be honest, it is rather difficult to determine which is which. I believe that the increase in dividend, as you correctly pointed out, has downward rigidity, buyback is a onetime event. Therefore, there are also differences in how the impact on the capital is understood whether it is over the long term or the short term, but it is difficult for me to comment since I cannot speak for regulators.

Regarding the second question, on the credit cost. This time, we estimated the amount to be JPY 350 billion, with the expected reduction of around JPY 170 billion. Roughly speaking, the breakdown of the JPY 170 billion reduction is as follows. First, I have to start with some increase. This is associated with 2 consumer finance companies, NICOS and ACOM. In fiscal 2020, as I mentioned earlier, consumer spending related businesses were impacted. Due to decrease in balance, credit cost decreased, and we expect some rebound from this. This is expected to be around JPY 20 billion, roughly speaking, and this is about the increase in credit cost.

As for the decline, in very rough times, there was a decline of about JPY 200 billion, when JPY 20 billion is added to JPY 170 billion. Overall, it is around JPY 100 billion each for the bank on nonconsolidated basis and for the 3 partner banks. Among 3 partner banks, we believe that the largest impact will come from MUAH in the U.S. The results of MUAH from their January to March quarter that will be reflected in our first quarter, had a reversal of credit costs of around JPY 18 billion, in part due to CECL impact.

In fiscal 2020, MUAH did provide for credit cost in substantial amount, and there may be a fall from that level. As for the bank, as I said earlier, it is rather difficult to forecast. And I believe that there will be fluctuations depending on the performance of individual obligors. But as of now, including the general provisioning in March, that is the degree of reduction we expect.

We have less than 10 minutes remaining, but I would like to take the sixth question. Mr. Niwa from Citigroup Securities, please.

This is Niwa from Citi. I have question on overseas rates and capital policy. Could you discuss each with midterm business plan in mind? First is about overseas yield. What are the assumptions of interest rates overseas in the medium-term plan? If possible, could you share with us the trend and the differences in yield between the 2 partner banks? What I'm interested in is whether we can expect increase in both revenue and profit during the midterm plan through improvement in NIM or not? That is the first question.

The second question may overlap with earlier questions. But could you give us a guidance on shareholders' equity or total payout ratio? Simply, based on earlier presentation, if the profit for the final year is JPY 1 trillion, then dividing backwards, it will be JPY 13 trillion of shareholders' equity, which will mean that there will be no increase in shareholders' equity. Is this the correct way to understand? Or do you expect more than JPY 1 trillion of profit and perhaps total payout ratio is expected to be somewhat lower?

Thank you, Mr. Niwa, for those questions. As for overseas yield, the question was on deposit/lending rate. Starting with the nonconsolidated basis. First, the interest rates in the U.S. declined. Since the start of the new fiscal year, there was some decline in interest rates. Deposit rate also declined. And as a result, I think there was a catch-up. Against this backdrop, the lending spread overseas is gradually improving, as noted in the material for the investor meeting presentation for the second quarter last fiscal year.

In 3 years of the new medium-term plan, as I mentioned earlier, in relation to GCIB, while controlling risk-weighted assets, there will be a shift from less profitable assets to more profitable assets. And therefore, it will be consistent with that strategy. As the spread increases, we expect greater differences in yield between lending rate and deposit rate in foreign currency.

Next, turning to MUAH. Recently, U.S. rate is slightly coming down, and that has led to slight reduction in rate. In the first quarter from January to March, there was a slight decline again. But as we have stated before, the strategy itself is shifting from housing loans centered one to corporate lending, and we are expecting improvements in NIM.

As for the 2 banks in ASEAN, Krungsri and Danamon, we believe that the client may continue in fiscal 2021. That is because the balance of consumer finance and auto loan with higher spread has come down, and that impact will be reflected in fiscal '21 as well. Therefore, there will be a decline in fiscal '21, but policy rates have stabilized for now, and a portion in Japan with higher spread is expected to come back, so we expect a rebound after bottoming in fiscal '21.

Turning to the second question of total payout ratio. To be honest, we are not necessarily looking at total payout ratio. Regarding the dividend payout ratio, we are targeting 40%, and we would like to increase dividend. At that point in time, what the total payout ratio will be, including the amount of buyback, is not indicated for fiscal '21 nor for fiscal '22 or '23. There may be -- there may have been a related question on this earlier. But as for the capital surplus, comparing fiscal '23 with fiscal '21 and hypothetically, if we are to have total payout ratio, then it would be natural to assume that the total payout ratio would be greater in the later year.

It is almost time, but we have one more question. This will be the last question. Mr. Sameshima from SBI Securities, please.

This is Sameshima from SBI Securities. I have a question on cross shareholdings. If you have an estimate for the gain from the sales of these equities, could you provide that, please?

And secondly, what is the policy on the sale of equity holdings? I don't think there was any mention of this in the new medium-term plan. As for SMTH, Mitsui Trust, they announced their target of bringing cross shareholdings to 0. Could you share with us your personal view or comment on this.

Thank you for your questions. Regarding the equity holdings. First, as to what we expect regarding the gain on sale in this fiscal year. But before getting into that, I would like to touch upon the policy on sale of equity holdings in the 3 years under the medium-term plan. Now under the previous medium-term plan, the policy was to sell more than JPY 800 billion in 6 years. At the end of last fiscal year, including the last fiscal year, we had sold JPY 870 billion based on acquisition cost. As for the current midterm plan in 3 years, at least JPY 300 billion of equity holdings is to be sold. What we plan to achieve is the sale of minimum of JPY 300 billion or more than JPY 300 billion.

Regarding the gain on sale of equities holdings, internally, calculations are made, and we have some numbers, but to give you just a flavor, last fiscal year, we sold JPY 137 billion based on acquisition cost. With the sale of JPY 137 billion, we made gain of JPY 130 billion. Since we plan to sell more than JPY 300 billion in the 3-year term, if we are to simply divide by 3, it would be JPY 100 billion this fiscal year. Looking at the stock market levels, stock prices rose since the second half of last fiscal year. I think on average, stock prices are higher this fiscal year. So in a way, at least, we may be able to expect similar amounts from gain on sale of equities as last fiscal year.

Regarding the sale of entire equity holdings announced by SMTH, as CFO, how do I see it personally was the second question? My first impression was that it was a bold announcement. We also state in our corporate governance report that our basic policy is to reduce the balance of cross shareholding of shares. Based on this policy, we are reducing our equities holding through dialogue with our customers. The significance of holding of these shares and economic rationale are examined as we engage in dialogue with our customers. In that sense, our basic policy is to reduce equity holdings. Therefore, I feel that our policy is not so different. Having said so, however, economic rationale must be thoroughly examined. I believe we also have to think about how our debt governance should be as a financial institution. I feel that evolution in this respect may also be necessary. Thank you for your question.

It is now time to end the session today. As there seems to be no more question, we would like to end the Q&A session. Before we close, I would like to invite Mr. Yonehana to say a few words in closing.

Thank you for your time, and thank you for your valuable questions today. There is still not a clear prospect of containing COVID-19 pandemic, and there are many uncertainties regarding the outlook of the business environment. However, we will continue to make efforts to manage our finances and capital in stable and sustainable manner with an emphasis on dialogue with shareholders and investors. I would like to ask for your continued support and understanding. Thank you very much.

With that, we would like to conclude financial presentation by Mitsubishi UFJ Financial Group for the term ending March 2021. Thank you.