MUFG is the largest of Japan’s three megabanks, and has the most diversified operations by business line and geography. It has also been the most acquisitive until recently.

Core profitability had been weak due to Japan’s ultra-low interest rates and growth; that improved post an efficiency drive and a CEO change in April 2020; the bank has the best international margin and benefits from rising domestic interest rates.

Given its size and systemic importance, MUFG is considered too big to fail, and will be supported by the Japanese government if needed.

Its recent divisional performance has been strong, with the domestic businesses benefiting from higher JGB yields.

Total credit costs are running at JPY 251 bn in 9M24, of which JPY 203 bn is from overseas operations. As MUFG has budgeted for JPY 400 bn of credit costs this year, there could be some serious kitchen sinking in the coming quarter.

The group’s cost-income ratio was previously in the high 60’s a few years ago, but improved efficiency, the sale of MUFG Union Bank in the US, and better revenues has led to this ratio falling to 61% in FY23 and 58% in 9M24; the group targets a 60% cost-income ratio.

MUFG is exposed to Japanese equities through large unrealised gains, but has steadily been decreasing its shareholdings every year. It reduced the MTM impact of rising yields on its $ bond portfolio, as well as the potential impact on its JGB portfolio given the modifications to yield curve controls.