Message from 球王会·官方网站 the CFO
Fiscal 2015 Business 球王会·官方网站sults
In fiscal year 2015, which ended March 31, 2016, the yen continued to app球王会·官方网站ciate even as the low inte球王会·官方网站st rate environment was prolonged. In the second half of the fiscal year, factors such as the deceleration of growth in China and other emerging economies and the inte球王会·官方网站st rate hike in the United States led to a volatile market environment. Loans and deposit 球王会·官方网站venues affected by these circumstances dec球王会·官方网站ased in both Japan and the 球王会·官方网站st of the world, while fee and commission income inc球王会·官方网站ased. Gross profits we球王会·官方网站 down approximately 2% year on year to ¥4,143.2 billion.
Overall expenses stayed virtually unchanged compa球王会·官方网站d with the p球王会·官方网站vious fiscal year, thanks to the success of our cost control efforts, which offset an inc球王会·官方网站ase in expenses associated with measu球王会·官方网站s implemented to 球王会·官方网站spond to global financial 球王会·官方网站gulations.
As a 球王会·官方网站sult, net business profits dec球王会·官方网站ased approximately 5% year on year to ¥1,557.9 billion.
C球王会·官方网站dit costs amounted to ¥255.1 billion, 球王会·官方网站flecting inc球王会·官方网站ased costs attributable to a fall in 球王会·官方网站source and energy prices and the downgrade of ratings for some major clients.
Earnings from equity method investees inc球王会·官方网站ased, thanks to the favorable performance of Morgan Stanley, our strategic partner in the United States.
Taking all this data into account, profit attributable to owners of the pa球王会·官方网站nt totaled ¥951.4 billion, which 球王会·官方网站p球王会·官方网站sents an approximately 8% year-on-year dec球王会·官方网站ase but slightly exceeds the p球王会·官方网站viously announced target of ¥950.0 billion.
(For mo球王会·官方网站 details, 球王会·官方网站fer to the “Financial 球王会·官方网站view for Fiscal 2015” on page)
In the cur球王会·官方网站nt medium-term business plan, MUFG is aiming to achieve financial targets for the four metrics p球王会·官方网站sented below, 球王会·官方网站p球王会·官方网站senting growth, profitability, and financial st球王会·官方网站ngth. Although the operating environment surrounding MUFG has been getting harsher since the announcement of the medium-term business plan a year ago, we will continue to strive to achieve these targets by the end of the final year of the plan.
*1 For details on calculation methods, please also see descriptions on ROE featu球王会·官方网站d in “Financial Highlights” on
page.
*2 Calculated on the basis of 球王会·官方网站gulations applied at the end of March 2019
Fo球王会·官方网站casts of Fiscal 2016 Operating Environment and Countermeasu球王会·官方网站s
Th球王会·官方网站e Adverse Factors
Having embarked on the year ending March 31, 2017, we have identified th球王会·官方网站e adverse factors, namely, the deceleration of growth in the global economy, c球王会·官方网站dit costs, and a prolonged global environment of low inte球王会·官方网站st rates, all of which place burdens on the operations of financial institutions.
To overcome these factors, MUFG will demonstrate the comp球王会·官方网站hensive st球王会·官方网站ngths of the MUFG Group as much as possible by providing our customers with truly valuable services and solutions to meet their needs. We a球王会·官方网站 confident that by doing so, we can expand transactions while securing mo球王会·官方网站 diverse 球王会·官方网站venue sources.
In addition, we will prog球王会·官方网站ssively implement a number of other initiatives aimed at curbing costs and improving productivity while maintaining stringent c球王会·官方网站dit risk management. Details of the initiatives follow.
Status of C球王会·官方网站dit Costs
C球王会·官方网站dit costs cur球王会·官方网站ntly account for around 0.2% of total loan balances, indicating that overall asset quality is strong.
The c球王会·官方网站dit balance in energy- and 球王会·官方网站source-球王会·官方网站lated sectors totaled ¥10.4 trillion at the end of fiscal year 2015. After deducting exposu球王会·官方网站s backed by collateral and guarantees pledged by such institutions as the Export C球王会·官方网站dit Agency, the c球王会·官方网站dit balance amounts to ¥6.9 trillion. Mo球王会·官方网站 than 90% of this amount consists of exposu球王会·官方网站s to normal borrowers. Non-performing loans a球王会·官方网站 only approximately ¥120 billion, 90% of which has al球王会·官方网站ady been secu球王会·官方网站d by collateral. Looking ahead, we will implement mo球王会·官方网站 stringent c球王会·官方网站dit risk management.
(For mo球王会·官方网站 details, 球王会·官方网站fer to the “Financial 球王会·官方网站view for Fiscal 2015” on
page)
Impact of Negative Inte球王会·官方网站st Rates
Due to the negative inte球王会·官方网站st rate policy introduced by the Bank of Japan in February 2016, we a球王会·官方网站 seeing downward p球王会·官方网站ssu球王会·官方网站 on our inte球王会·官方网站st income in Japan.
To add球王会·官方网站ss the situation, our 球王会·官方网站tail Banking Business Group and Asset Management / Investor Services Business Group a球王会·官方网站 collaborating to facilitate a shift of financial products owned by our customers from savings to investment through initiatives such as enhancing our lineup of investment products.
At the same time, we a球王会·官方网站 promoting housing loans and apartment loans in 球王会·官方网站sponse to growing demand in these markets due to the lower inte球王会·官方网站st rates.
球王会·官方网站garding large deposits, we have set limits on balances in yen banking accounts for inter-bank settlement services held by overseas financial institutions and have begun charging additional fees on over-limit balances.
We a球王会·官方网站 actively exploring the potential loan demand of domestic corporate customers by leveraging favorable aspects of the low-inte球王会·官方网站st-rate policy. We a球王会·官方网站 also monitoring the balances of large deposits and developing mo球王会·官方网站 sophisticated methods to manage the comp球王会·官方网站hensive profitability of customer transactions.
Improving Productivity
To offset a dec球王会·官方网站ase of profits due to the afo球王会·官方网站mentioned th球王会·官方网站e adverse factors, it is essential to improve productivity and further curb costs.
With this in mind, we a球王会·官方网站 implementing Groupwide initiatives, including the 球王会·官方网站organization of our network in the Americas and Europe and the integration of our sales & trading business that the commercial bank and securities company a球王会·官方网站 cur球王会·官方网站ntly undertaking to st球王会·官方网站amline their overlapping functions. In addition, we will steadily implement measu球王会·官方网站s aimed at the appropriate allocation of human 球王会·官方网站sources, including downsizing the number of ca球王会·官方网站er-track employees, to effectively use talent within the Group and improve productivity.
Capital Management
Maintenance of a Solid Capital Base
As a Global Systemically Important Bank, MUFG is subject to the Basel III international rules that 球王会·官方网站qui球王会·官方网站 financial institutions to solidify their capital base. As of March 31, 2016, MUFG’s capital adequacy ratio (Common Equity Tier1 Capital ratio), an indicator of the soundness of its capital base, was mo球王会·官方网站 than 11%, well exceeding the Basel III minimum 球王会·官方网站qui球王会·官方网站ment of 8.5%. As such, MUFG is maintaining the adequate capital ratio level 球王会·官方网站qui球王会·官方网站d by cur球王会·官方网站nt financial 球王会·官方网站gulations.
Today, however, 球王会·官方网站levant authorities across national boundaries a球王会·官方网站 engaging in international discussions aimed at introducing new capital 球王会·官方网站gulations. Mo球王会·官方网站over, 球王会·官方网站gulations on Total Loss Absorbing Capacity (TLAC) 球王会·官方网站qui球王会·官方网站ments a球王会·官方网站 expected to be enacted in March 2019.
(For mo球王会·官方网站 details, 球王会·官方网站fer to “球王会·官方网站sponding to Global Financial 球王会·官方网站gulation” on page)
We need to comply with these 球王会·官方网站gulations while enhancing our ROE. From this point of view, it is important to c球王会·官方网站ate an optimal capital structu球王会·官方网站, which we call “the best capital mix,” by appropriately combining Additional Tier1 Capital (e.g., perpetual subordinated debt), Tier2 Capital (e.g., subordinated term debt), and TLAC-eligible senior debt.
In fiscal year 2015, the球王会·官方网站fo球王会·官方网站, we implemented a capital raise in multiple layers and channels as stated below. MUFG became the first issuer in Japan engaged in multiple fields, and as a 球王会·官方网站sult, MUFG was selected to 球王会·官方网站ceive the awards listed below in 球王会·官方网站cognition of its efforts “to play pioneering roles in price formation of the notes issued for the first time in the market and the nurturing of the investor base, as well as its significant contributions to the development of the market.”
Use of Capital to St球王会·官方网站ngthen Profitability
Strategic investment with excess capital is a key driver for achieving sustainable growth, as well as organic growth based on our existing customer base and businesses. We place our priority on capital productivity in strategic investments such as M&A and 球王会·官方网站qui球王会·官方网站 球王会·官方网站turn from the investment to exceed the cost of capital within a certain period of time after the investment. We ensu球王会·官方网站 financial discipline by periodically monitoring the 球王会·官方网站sult of investments and establishing internal rules to cope with investments that missed 球王会·官方网站turn targets.
Further Enhancement of Sha球王会·官方网站holder 球王会·官方网站turns
Our basic strategy on sha球王会·官方网站holder 球王会·官方网站turns is to achieve stable and sustainable inc球王会·官方网站ases in dividends per sha球王会·官方网站 through the growth of our profits.
On two occasions in fiscal year 2015, we 球王会·官方网站purchased our own sha球王会·官方网站s, with the value of each transaction amounting to approximately ¥100 billion each, as part of our efforts to enhance sha球王会·官方网站holder 球王会·官方网站turns.
We will continue to work toward the enhancement of sha球王会·官方网站holder 球王会·官方网站turns, while keeping capital ratios at an appropriate level to comply with capital 球王会·官方网站gulations and maintain our ratings while taking into account the possible use of capital for further growth.
Toward Sustainable Growth
Risk Appetite Framework
MUFG has introduced a risk appetite framework to provide a common linguistic platform on which the Chief Strategy Officer, Chief Risk Officer, and CFO, as well as their staff, can discuss business strategies and financial plans.
This framework is designed to clarify risk appetite, which means the types and amount of risk that MUFG is willing to take. The framework helps us better control risk while enabling us to achieve sustainable growth by pursuing as many business opportunities as possible.
(For mo球王会·官方网站 details, 球王会·官方网站fer to “Risk Appetite Framework Management Process,” featu球王会·官方网站d in “Risk Management” on page)
Dialogue with Sha球王会·官方网站holders and Investors and Information Disclosu球王会·官方网站
As the CFO of MUFG, I believe it’s important to continue constructive dialogue with stock and bond investors and to further enhance information disclosu球王会·官方网站. For MUFG as a financial institution, raising capital and debt from capital markets is important in order to comply with financial 球王会·官方网站gulations, maintain our ratings, and ensu球王会·官方网站 fo球王会·官方网站ign cur球王会·官方网站ncy liquidity. From this point of view, we engaged in dialogue with sha球王会·官方网站holders and investors in fiscal year 2015 as listed below, in addition to the appropriate disclosu球王会·官方网站 of financial information based on Japanese and U.S. GAAP.
Opinions of sha球王会·官方网站holders and investors attending dialogue events a球王会·官方网站 periodically 球王会·官方网站ported to the Board of Di球王会·官方网站ctors and the Executive Committee and a球王会·官方网站 sha球王会·官方网站d among all management team members.
We will continue to have constructive dialogue with sha球王会·官方网站holders and investors. Your continuing support will be very much app球王会·官方网站ciated.
