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Mitsubishi UFJ Financial Group
- Sector: Financial Services
- Sub Sector: Banks
- Region: Japan
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Fundamental View
AS OF 26 Nov 2025MUFG is the largest of Japan’s three megabanks, and has the most diversified operations by business line and geography. It had also been the most acquisitive till the early 2020s.
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 improved international margins and fee income, 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.
Business Description
AS OF 26 Nov 2025- The 2 main banks of MUFG are MUFG Bank (earlier Bank of Tokyo-Mitsubishi UFJ or BTMU) & Mitsubishi UFJ Trust & Banking. In the early stages of Japan's long banking crisis, Bank of Tokyo merged with Mitsubishi Bank, and in the late stages they absorbed UFJ (former Sanwa Bank & Tokai Bank) while Mitsubishi Trust absorbed Toyo Trust & Nippon Trust.
- The group includes consumer lenders Mitsubishi-UFJ NICOS & ACOM, and securities/IB JVs with Morgan Stanley. MUFG invested in Morgan Stanley in 2008 and now has a ~20% stake. In Dec-22, it completed the sale of its US retail and commercial bank, MUFG Union Bank, to US Bancorp.
- It has a majority stake in Thailand's Bank of Ayudhya (now Krungsri), 20% stakes in Vietnam's Vietinbank and Philippines' Security Bank, and 100% of Indonesia's Bank Danamon.
- In 2019, it acquired Colonial First State from Commonwealth Bank of Australia to strengthen its global asset management business, in 2020 it invested $700 mn in SE Asia's Grab, and more recently has bought Home Credit's Philippine and Indonesian subsidiaries, Link (an Australian pension fund administrator), auto loan companies in Indonesia, Albacore Capital, StanChart's Indonesian retail operations, and a stake in an Indian NBFI.
Risk & Catalysts
AS OF 26 Nov 2025Its recent divisional performance has been strong, with the domestic businesses benefiting from higher BOJ rates, and robust growth in fee income.
Credit costs have been rising because of increased exposure to personal unsecured loans in Japan and Southeast Asia, as well as higher-risk lending in Southeast Asia.
Its close relationship with Morgan Stanley has led it to take large positions in US corporate finance loans, which has been problematic on occasion.
We see limited risk from rising JGB yields as the large equity unrealised gains dwarf the unrealised losses on the bond portfolio.
Key Metric
AS OF 26 Nov 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | 1H25 |
|---|---|---|---|---|---|
| Net Interest Revenue/Average Assets | 0.57% | 0.79% | 0.64% | 0.73% | 0.73% |
| Operating Income/Average Assets | 1.11% | 1.22% | 1.23% | 1.22% | 1.48% |
| Operating Expense/Operating Income | 69% | 65% | 61% | 67% | 56% |
| Pre-Impairment Operating Profit / Average Assets | 0.34% | 0.43% | 0.48% | 0.40% | 0.65% |
| Impairment charge/Average Loans | (0.30%) | (0.61%) | (0.36%) | 0.00% | (0.12%) |
| ROAA | 0.32% | 0.30% | 0.39% | 0.47% | 0.65% |
| ROAE | 6.7% | 6.5% | 8.1% | 9.3% | 12.5% |
| CET1 post Basel 3 reforms excl. secs gains | 10.4% | 10.3% | 10.1% | 10.8% | 10.5% |
CreditSight View Comment
AS OF 07 Jan 2026MUFG is the largest of the megabanks with more diversified business lines than its peers. Digitalisation and operational efficiency improvements, in addition to higher rates in Japan and the US, had led to much better results in FY24. Lending discipline has lifted international margins; domestic margins though lag its peers. Its ~20% shareholding in Morgan Stanley has been a boon. Its $ liquidity is the best amongst its peers, and government support is assured. Its CET1 ratio ratio has fallen to ~180 bp, which we see as low; pro-forma for the Shriram acquisition it will fall to a particularly low ~120 bp. However, we see the group’s earnings power improving from BOJ rate rises and so continue with our Market perform recommendation. We see current levels on its 6NC5 of ~G+75 bp as fair.
Recommendation Reviewed: January 07, 2026
Recommendation Changed: August 05, 2025
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