Japan's MUFG yet to feel interest rate hikes in Q1, profits buoyed by weak yen

A man walks past a signboard of Mitsubishi UFJ Financial Group and MUFG Bank at its headquarters in Tokyo·Reuters
Anton Bridge
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By Anton Bridge

TOKYO (Reuters) -Mitsubishi UFJ Financial Group (MUFG) recorded higher loan and deposit interest income in Japan and overseas in the April-June period, but the impact of the end of negative interest rates on domestic lending profitability proved muted.

Japan's largest lender by assets booked a 0.4% drop in first-quarter profit due to a change in a reporting period at an overseas subsidiary and affiliate, but profits across its customer segments grew, aided by the weak yen.

The weak yen was a fillip to exporting clients, whose increased demand for funding and consulting services boosted fees.

Across the group, the exchange rate helped to lift net profit by around 25 billion yen ($166.67 million) as compared to the same period a year ago.

MUFG is the second of Japan's three megabanks to report quarterly results, following Mizuho Financial Group on Wednesday, with Sumitomo Mitsui Financial Group to come on Friday.

Profitability in Japan's banking sector has long suffered under the Bank of Japan's ultra-easy monetary policy, but MUFG calculated the end of negative interest rates in March only added 15 billion yen to net profit for the quarter.

On Wednesday, the Bank of Japan hiked short-term interest rates further to 0.25% and announced a shrinking of its bond-buying programme.

While MUFG maintained its profit target of 1.5 trillion yen for the 12 months to March 2025, Takayuki Hara, head of MUFG's corporate planning division, said the group may reassess in the future to account for the U.S. election in November and movements in Japan-U.S. interest rate spreads.

MUFG reported group net profit of 556 billion yen for April-June, compared with 558 billion yen in the same period a year earlier.

Adjusting for changes in the accounting period at MUFG affiliate Morgan Stanley, in which it holds a 23% stake, and Thai subsidiary Bank of Ayudhya, profits rose by 55 billion yen, or 11.7%, compared to the same period a year prior.

($1 = 150.1500 yen)

($1 = 150.0000 yen)

(Reporting by Anton Bridge and Miho Uranaka; Editing by Jacqueline Wong and Sharon Singleton)