Mitsubishi UFJ Financial Group (MTU) is a giant bank holding company with global operations just like JP Morgan Chase (JPM) and Citigroup (C) but unlike Citigroup and JP Morgan which are headquartered in the US, Mitsubishi UFJ Financial Group is headquartered in Japan. In similarity to JP Morgan and Citibank, Mitsubishi UFJ Financial was also named in Libor fixing scandal and it has consequently suspended two London traders over Libor. Mitsubishi UFJ Financial Group is Japan’s largest bank by assets – $2.5 trillion US dollars – and market capitalization. MTU’s core banking units include Bank of Tokyo – Mitsubishi UFJ, Mitsubishi UFJ Trust and Banking, and Mitsubishi UFJ Securities Holdings. MTU also owns the Union Bank of California which by deposit ranking is considered as the third largest bank in the state. Mitsubishi UFJ Financial is one of the few Japanese firms worthy of a closer look for investment opportunities by investors who are looking to diversify their portfolio globally.
MTU has kept a flat dividend history for the last few years but it is worthy to note that it once maintained excellent dividend payouts though mingled with poor rating on consistent dividend increases. Also, despite its flat dividend history for the last few years, MTU stock is worth noting because it is one of the few stocks in the cheapest billion-dollar bracket still selling below $5. Besides, Mitsubishi UFJ Financial recently reported its financials for first quarter of 2013 fiscal year ended June 30, 2012. Though it reported a dip in its earnings for the period, it recorded growth in deposits and appreciable decline in credit costs.
MTU recorded a net income per common stock of JPY 12.89 compared to JPY 35.33 reported in the same period of 2011 which translates to 16 and 43 cents respectively. MTU’s gross profits for the first quarter rose by JPY 77.3 billion ($1 billion) or 9.1 percent from JPY854.9 billion ($10.5 billion) to JPY 932.3 billion ($11.7 billion).
Due to decrease in demand for housing loans and domestic corporate loans, MTU reported total loans of JPY84.2 trillion as against JPY84.6 trillion reported for the quarter ended March 31, 2012. These two figures translate to $1.1 trillion and $1.0 trillion US dollars respectively. As part of its projection for the full fiscal year ending March 31, 2013, Mitsubishi UFJ Financial targets JPY670 billion ($8.4 billion) as combined net income.
In comparison to Mitsubishi UFJ Financial, Mizuho Financial Group (MFG) – the second largest financial group in Japan – has a dividend yield of almost 5 percent as against 3.3 percent for Mitsubishi UFJ. However, MFG also suffers the same fate with MTU as its dividend has been frozen in recent years in like manner.
Also, Sumitomo Mitsui Financial (SMFG) is another giant financial services provider based in Japan that is a bank holding company. Though SMFG has been able to withstand recent global financial crises and its current dividend yield of 4 percent is also encouraging, it is nonetheless completely immune against the recent weaknesses in Japanese stocks.
Considering the strong business model of Mitsubishi UFJ Financial and its strategic alliance with Morgan Stanley (MS), which includes a loan marketing joint venture that will afford clients based in the United States an opportunity to enlarge the already famous lending and capital market services of both firms, Mitsubishi UFJ is set to boost its earnings and profits. In addition, Mitsubishi UFJ has a record of diversified product mix and lower credit costs which will help the company improve its earnings and bottom line further. I recommend MTU stock though I’m concerned about the increasing volatility and competition it’s facing in the Japanese economy.