Mitsubishi UFJ Financial Group,Inc. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥6.89T
• Net Income: ¥1.36T
• EPS: ¥113.07

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Verdict: Solid but mixed quarter—net profit grew faster than revenue, lifting margins, yet core bank profitability (NIM) remains subdued and leverage is structurally high as is typical for megabanks. Revenue was 68,937.75 (100M JPY, +0.5% YoY) while net income was 12,929.55 (100M JPY, +2.8% YoY). Ordinary income was 17,466.75 (100M JPY, -0.6% YoY), indicating softer core earnings breadth despite higher bottom line. Profit before tax reached 17,705.18 (100M JPY) with an effective tax rate of 23.0%. EPS (basic) was 113.07 JPY on average shares of 11.44bn. Net profit margin improved to 18.8% from roughly 18.4% a year ago, implying c.+41 bps expansion. ROE came in at 5.8% (DuPont-consistent), supported by modest margin improvement, very low asset turnover (0.017x), and high financial leverage (18.18x). Banking KPIs were mixed: NIM at 1.2% is below the 1.5% warning threshold, while cost efficiency appears exceptional with a CIR of 23.4% (well below the <50% benchmark). Balance sheet scale remains vast with total assets of 4,043,181.08 (100M JPY) and equity of 222,382.09 (100M JPY); D/E of 17.18x is very high but structurally normal for banks. Liquidity looks ample with an LDR of 54.2%, indicating funding capacity well in excess of loan demand. Cash flow statements were not disclosed, so operating cash conversion and free cash flow coverage cannot be assessed this quarter. The payout ratio is calculated at 59.7%, near the upper bound of typical sustainability thresholds, but absolute sustainability depends on regulatory capital (not disclosed here). Earnings quality assessment is constrained due to missing OCF; however, margin-led profit growth with only modest top-line expansion suggests a cleaner mix than heavy one-off gains. Forward-looking, profitability depends on the trajectory of global and domestic rates (NIM), credit cost normalization, fee income growth, and market-sensitive gains. Given low NIM and very low LDR, there is room to reprice assets and deploy liquidity if demand and rates allow, but market volatility and credit cycle turns remain key swing factors.

Profitability Analysis

ROE decomposition: ROE (5.8%) = Net Profit Margin (18.8%) × Asset Turnover (0.017x) × Financial Leverage (18.18x). The margin component improved modestly YoY, inferred from NI growth (+2.8%) outpacing revenue (+0.5%), while leverage and asset turnover likely remained broadly stable. Business rationale: net margin lift likely reflects lower credit costs or improved non-interest/market-related income, partially offset by softer ordinary income (-0.6% YoY) and a subdued NIM (1.2%). Sustainability: margin gains appear modest and could be susceptible to market swings (trading/investment gains) and credit cost normalization, so not guaranteed to persist. Operating leverage: revenue growth was tepid (+0.5%) versus NI (+2.8%), implying some cost discipline or mix shift; the reported CIR of 23.4% suggests strong efficiency, though such a low level may reflect mix (market-related income) rather than purely structural cost improvement. Watchpoints: if SG&A or underlying expenses (not disclosed) start to normalize upward while revenue stays flat, margin gains could reverse. Overall, the largest driver versus last year appears to be the margin component, not asset turnover or leverage.

Growth Assessment

Top-line growth was modest at +0.5% YoY, with net income up +2.8% YoY, signaling mild positive operating leverage. Ordinary income declined -0.6% YoY, suggesting mixed core trends beneath the headline bottom-line improvement. Banking metrics show NIM at 1.2% (weak), implying that net interest income tailwinds from rates are limited; however, the very low CIR (23.4%) points to strong efficiency and/or non-interest contribution. Revenue sustainability hinges on: (1) rate path and asset repricing to lift NIM, (2) loan growth (current LDR of 54.2% indicates capacity), and (3) fee/market income stability. Absent evidence of one-off gains, the profit quality appears acceptable, but data gaps (no segment or cash flow detail) constrain certainty. Outlook: modest growth likely if rate environment is constructive and credit costs remain benign; downside if market income fades or credit costs normalize higher.

Financial Health

Leverage: D/E is 17.18x—an explicit warning threshold breach (>2.0), though this is structurally normal for a megabank. Liquidity: LDR at 54.2% signals ample deposit funding relative to loans, reducing near-term liquidity risk and maturity mismatch pressures. Current ratio/quick ratio are not meaningful for banks and were not disclosed. Asset base totals 4,043,181.08 (100M JPY) with equity of 222,382.09 (100M JPY). We lack disclosure on short-term vs long-term funding mix and regulatory capital (e.g., CET1), which are critical for solvency assessment. No off-balance sheet obligations were disclosed here; however, as a large financial group, contingent liabilities (guarantees, derivatives, and commitments) typically exist but are not captured in the provided data.

Cash Flow Quality

OCF and FCF were not reported; therefore, OCF/NI and FCF coverage cannot be evaluated this quarter. With NI of 12,929.55 (100M JPY) and a payout ratio of 59.7%, dividend coverage by accounting earnings appears adequate, but cash conversion is unknown. Working capital signs cannot be assessed for a bank using traditional metrics. No evidence of working capital manipulation is inferable from the dataset due to missing cash flow and balance sheet detail by category. Conclusion: earnings quality assessment is constrained; monitor future filings for OCF and credit cost disclosure.

Dividend Sustainability

Calculated payout ratio is 59.7%, near the typical sustainability threshold (<60%). FCF coverage is not calculable due to absent cash flow data. Sustainability will depend on (1) stability of earnings under low NIM conditions, (2) credit cost trajectory, and (3) regulatory capital buffer (CET1 ratio and internal capital generation), which were not disclosed. Given ample liquidity (LDR 54.2%) and moderate net income growth, current dividends appear covered by earnings, but visibility is limited without capital ratio and cash flow information. Policy outlook likely remains progressive but calibrated to capital adequacy and macro uncertainty.

Risk Assessment

Business Risks:

• Net interest margin pressure at 1.2%, below healthy benchmarks
• Credit cost normalization from currently benign levels could erode margins
• Market-related income volatility (trading/investment gains) affecting ordinary income
• Low loan-to-deposit utilization (LDR 54.2%) may cap revenue growth if loan demand stays weak
• Operational risk inherent in a large global financial group

Financial Risks:

• High leverage (D/E 17.18x), structurally normal for banks but magnifies shocks
• Interest rate risk in the banking book (valuation impacts from rate moves)
• Securities/derivatives valuation and liquidity risks under market stress
• Funding concentration or large-depositor behavior (not disclosed)
• Regulatory capital adequacy unknown in this dataset (CET1 not provided)

Key Concerns:

• NIM below 1.5% warning threshold despite rising rates globally
• Ordinary income down -0.6% YoY, implying mixed underlying momentum
• Dividend payout near 60% with no cash flow or capital ratio disclosure to corroborate sustainability
• Data gaps (OCF, segment breakdown, credit costs) limit visibility into earnings quality

Investment Implications

Key Takeaways:

• Net profit grew +2.8% YoY on modest revenue growth (+0.5%), lifting net margin by ~41 bps
• ROE of 5.8% is supported by high leverage and modest margin; asset turnover remains structurally low
• NIM at 1.2% is a headwind; CIR at 23.4% indicates strong efficiency/mix tailwind
• Balance sheet liquidity is ample (LDR 54.2%), offering deployment capacity if loan demand and pricing improve
• Dividend payout at ~60% looks earnings-covered but not validated by cash flow or capital ratios

Metrics to Watch:

• CET1 ratio and total capital ratio (Basel III/IV)
• Net interest margin (quarterly trend) and asset repricing progress
• Credit costs/NPAs/NPL coverage
• Fee and market-related income volatility
• Loan growth vs deposit growth (LDR trajectory)
• Cost-to-income ratio on a normalized basis
• Shareholder returns: dividends and buybacks relative to capital position

Relative Positioning: Among megabanks, profitability appears constrained by a low NIM but partially offset by strong reported efficiency and robust liquidity; sustaining ROE improvement likely requires either higher NIM, better fee income, or disciplined capital allocation.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
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