Exhibit 99(a)
TABLE OF CONTENTS
Forward-Looking Statements
This document contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements pertain to matters such as our current intent, business plan, targets, belief or expectations or the current belief or current expectations of our management with respect to our results of operations, financial condition, and capital and liquidity position, and contain words such as “anticipate,” “aim,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probability,” “risk,” “will,” “may” and similar expressions. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those which are aimed, anticipated, believed, estimated, expected, intended or planned as expressed or implied in or by such forward-looking statements. Factors that could cause such differences include, without limitation, developments in the economic, market, competitive, regulatory and other business environment, and our inability to implement business strategies, which may adversely affect our results of operations, financial condition, and capital and liquidity position, including, among other things, increases in our credit and other costs and declines in the value of our investment portfolio. For a more detailed description of such risks and uncertainties, please refer to our most recent disclosure documents such as our annual report on Form 20-F and other documents filed with or submitted to the U.S. Securities and Exchange Commission. Given these and other risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this document. We are under no obligation, and disclaim any obligation, to update or alter our forward- looking statements, whether as a result of new information, future events or otherwise unless required by law.
FINANCIAL REVIEW
Introduction
We, Mitsubishi UFJ Financial Group, Inc., or MUFG, are the holding company for MUFG Bank, Ltd., or “BK,” Mitsubishi UFJ Trust and Banking Corporation, or “TB,” Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (through Mitsubishi UFJ Securities Holdings Co., Ltd., an intermediate holding company), Mitsubishi UFJ NICOS Co., Ltd., Mitsubishi UFJ Asset Management Co., Ltd. and other subsidiaries. Through our subsidiaries and affiliated companies, we engage in a broad range of financial businesses and services, including commercial banking, investment banking, trust assets and asset management services, securities businesses, and credit card businesses, and provide related services to individuals primarily in Japan, Thailand and Indonesia and to corporate customers around the world.
For the purposes of this Report, we have prepared our unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, except for otherwise specifically identified information, including business segment information, risk-adjusted capital ratios, leverage ratios, total loss-absorbing capacity, or TLAC, ratios, liquidity coverage ratios, or LCRs, and net stable funding ratios, or NSFRs. Unless otherwise stated or the context otherwise requires, all amounts in our unaudited condensed consolidated financial statements are expressed in Japanese yen.
In this Report, unless otherwise indicated or the context otherwise requires, all figures are rounded to the figures shown except for the capital ratios, capital components, risk-weighted assets, leverage ratios, TLAC ratios, LCRs and NSFRs of MUFG and its domestic subsidiaries, which are rounded down and truncated to the figures shown. In some cases, figures presented in tables are adjusted to match the sum of the figures with the total amount, and such figures are also referred to in the related text.
Our fiscal year ends on March 31 of each year. The “current six-month period” as used in this Report means the six-month period from April 1, 2024 to September 30, 2024.
Effective April 1, 2024, Bank of Ayudhya Public Company Limited, or Krungsri, our Thai-based subsidiary, is consolidated in our financial statements based on an April to March financial reporting period, instead of the previous January to December period, in order to provide investors with more timely and relevant financial information. Our condensed consolidated financial statements for the six months ended September 30, 2023 and as of March 31, 2024 included in this Report have accordingly been adjusted, with Krungsri being consolidated therein based on its financial statements for the same six-month period and as of the same date. For more information, see Note 1 to our unaudited condensed consolidated financial statements.
Note on Our Internal Control Over Financial Reporting and Disclosure Controls and Procedures
As disclosed in our annual report on Form 20-F for the fiscal year ended March 31, 2024, we restated our consolidated financial statements for the fiscal year ended March 31, 2023 to correct an error related to the accounting of the elimination of the three-month reporting lag applied to MUFG Union Bank, N.A. in connection with our sale of MUFG Union Bank that was completed on December 1, 2022. In connection with this restatement, our management concluded that our internal control over financial reporting was not effective as of March 31, 2024, due to a material weakness which management identified relating to a deficiency in the design of an existing internal control over the review and approval of non-routine U.S. GAAP accounting treatment considerations, which led to the restatement. The error resulting in the restatement of our March 31, 2023 financial statements was identified after March 31, 2024 and, therefore, management concluded that our internal control over financial reporting was also not effective as of March 31, 2023 and that the material weakness remained unremediated as of March 31, 2024. In addition, due to the material weakness, our CEO and CFO concluded that our disclosure controls and procedures were not effective as of March 31, 2024 and 2023.
Although we are implementing remediation measures to address our material weakness, these measures may not be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or prevent future control deficiencies or material weaknesses from occurring. Moreover, additional deficiencies and material weaknesses in our internal control over financial reporting may arise in the future. We may also not be able to identify all deficiencies and material weaknesses in our internal control over financial reporting. As a consequence, we may be unable to provide financial information in our consolidated financial statements and elsewhere in an accurate, timely and reliable manner and may need to restate our consolidated financial statements or other aspects of our periodic reporting. These consequences may undermine the confidence placed in our published financial information and other reported information by users of our consolidated financial statements, including holders of our securities, resulting in reductions in the price of our securities, and may also limit our access to financial markets,
weaken client or counterparty appetite to enter into transactions with us and subject us to potential regulatory or legal actions. Any of these impacts may materially and adversely affect our business, corporate value, results of operations and financial condition.
See our consolidated financial statements included in our annual report on Form 20-F for the fiscal year ended March 31, 2024 for details of the nature of the identified accounting error and “Item 15. Controls and Procedures” thereof for the identified material weakness and our remediation measures to address the material weakness."
Business Environment
Our results of operations and financial condition are exposed to changes in various external economic factors, including:
•general economic conditions,
•interest rates,
•foreign currency exchange rates, and
•stock prices.
General Economic Conditions
The global economy remained in a flux, with monetary policy adjustments implemented to reduce and stabilize inflation in, and manage the impact of adverse developments on, major markets, during the six months ended September 30, 2024. In Japan, the central bank began making changes to its monetary policy framework, including ending negative policy rates and reducing Japanese government bond purchases, designed to gradually normalize its monetary policy. In the meantime, policy rates were reduced in the United States and Europe. While the global economy showed signs of improvements, supported by a rebound in global trade and easing inflation, it is expected to remain unstable in the foreseeable future. The full extent of the effects of monetary policy changes on the economies of various countries, including price trends, remains to be seen. Also uncertain are the impact of political developments, such as the recent national election results in Japan, where the Liberal Democratic Party lost its majority, and the results of the recent U.S. presidential and congressional elections, on global economic stability, geopolitical risks, monetary policies, and fiscal policies, as well as the effects of fluctuations in financial markets, including foreign currency exchange, bond and stock markets, on the real economy.
Japan’s economy generally followed the global economic trends, showing a mixture of positive and negative trends during the six-month period ended September 30, 2024. Japan’s real gross domestic product, or GDP, improved by 0.5% for the quarter ended June 30, 2024, and by 0.3% for the quarter ended September 30, 2024, on a quarter-on-quarter basis. These improvements mainly reflected the moderate increases in production, employment and personal income in Japan, despite the relatively weak growth in private consumption. On a year-on-year basis, Japan’s real GDP contracted by 0.9% for the quarter ended June 30, 2024 and improved by 0.5% for the quarter ended September 30, 2024. Japan’s Consumer Price Index, or CPI, fluctuated between negative 0.3% and positive 0.5% on a month-on-month basis and between 2.5% and 3.0% on a year-over-year basis during the six months ended September 30, 2024. The unemployment rate in Japan remained low at 2.4% in September 2024 compared to 2.6% in March 2024. According to Teikoku Databank, a Japanese research institution, the number of companies that filed for legal bankruptcy in Japan between April 2024 and September 2024 was 4,990, an 18.6% increase from the same period of the previous fiscal year. The total liabilities of companies that filed for legal bankruptcy during the six months ended September 30, 2024 were ¥1,329 billion, a decrease of 16.2% from the same period of the previous fiscal year. The Japanese economy remains subject to instabilities resulting from geopolitical developments, increasing public debt, intensifying trade conflicts and global competition, declining domestic population, inflationary trends, downward pressure on private consumption, changes in the Bank of Japan's monetary policy, and various other factors that could adversely affect economic conditions in Japan.
The U.S. economy generally underwent upward trends during the six months ended September 30, 2024, with U.S. real GDP improving by 3.0% for the quarter ended June 30, 2024 and by 2.8% for the quarter ended September 30, 2024, on a quarter-on-quarter annualized basis. On a year-on-year basis, U.S. real GDP improved by 3.0% for the quarter ended June 30, 2024 and by 2.7% for the quarter ended September 30, 2024. The unemployment rate increased to 4.1% in September 2024 from 3.8% in September 2023. The long-term prospects of the U.S. economy remain uncertain in light of the impact of inflationary trends, geopolitical developments, changes in the political environment, instabilities in the real estate and banking sectors, the government’s economic, monetary, trade and foreign relations policies, and various other factors.
The Eurozone economy grew modestly during the six months ended September 30, 2024, with Eurozone real GDP improving by 0.2% for the quarter ended June 30, 2024 and by 0.4% for the quarter ended September 30, 2024, on a quarter-on-
quarter basis. On a year-over-year basis, Eurozone real GDP improved by 0.5% for the quarter ended June 30, 2024 and by 0.9% for the quarter ended September 30, 2024. The unemployment rate in the Eurozone was 6.3% in September 2024 compared to 6.6% in September 2023. The Eurozone economy remains subject to various uncertainties, including instabilities resulting from inflationary trends, geopolitical developments, concerns over the financial system and other factors.
In Asia excluding Japan, economic conditions in ASEAN (Association of Southeast Asian Nations) and NIEs (Newly Industrializing Economies) generally improved but the economic improvement remained relatively weak during the six months ended September 30, 2024. Meanwhile, in the Chinese economy, concerns remained particularly surrounding the real estate sector. The economic conditions of these regions remain subject to various uncertainties, including fluctuations in the global and local economies as well as geopolitical developments.
Interest Rates
The Bank of Japan modified its monetary policy in March 2024 to encourage the uncollateralized overnight call rate to remain at around 0 to 0.1% from negative 0.1%. In July 2024, the Bank of Japan further raised the rate to around 0.25%. In addition, the Bank of Japan is expected to continue reducing the amount of its monthly purchases of Japanese government bonds. The yield on 10-year Japanese government bonds fluctuated between 0.727% and 1.101% during the six months ended September 30, 2024. The yield has been fluctuating between 0.826% and 1.099% since October 2024.
In the United States, the Federal Open Market Committee decided to lower the target range for the federal funds rate by 50 basis points to 4.75% to 5% in its meeting in September 2024, and subsequently lowered the rate to 4.5% to 4.75% in November 2024. In addition, the Committee is expected to continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The 10-year U.S. Treasury bond yield decreased from 4.201% at the end of March 2024 to 3.782% at the end of September 2024, while fluctuating between 3.619% and 4.705% during the period. The yield has been fluctuating between 3.732% and 4.452% since October 2024.
Foreign Currency Exchange Rates
The Japanese yen appreciated against the U.S. dollar from ¥151.41 to the U.S. dollar as of March 31, 2024 to ¥142.73 to the U.S. dollar as of September 30, 2024. The Japanese yen has been fluctuating around ¥143 to ¥157 to the U.S. dollar since October 2024. The exchange rate may be affected by expected or implemented changes in the monetary policy in Japan or the United States and by any intervention by government agencies, including the Ministry of Finance of Japan.
The Japanese yen appreciated against the euro during the six months ended September 30, 2024, with the exchange rate being ¥159.43 to the euro as of September 30, 2024 compared to ¥163.24 to the euro as of March 31, 2024. The Japanese yen has been fluctuating between ¥158 and ¥167 to the euro since October 2024.
The Japanese yen was on a generally depreciating trend against the Thai baht during the six months ended September 30, 2024, with the exchange rate being ¥4.41 to the Thai baht as of September 30, 2024 compared to ¥4.16 to the Thai baht as of March 31, 2024. The Japanese yen has been fluctuating between ¥4.3 and ¥4.6 to the Thai baht since October 2024.
Stock Prices
The closing price of the Nikkei Stock Average, which is the average of 225 blue chip stocks listed on the Tokyo Stock Exchange, decreased from ¥40,369.44 on March 31, 2024 to ¥37,919.55 on September 30, 2024. The closing price of the Nikkei Stock Average has been fluctuating between ¥37,800 and ¥40,000 since October 2024.
Recent Developments
During the current six-month period, we engaged in transactions to ensure adequate capital base and structure, while pursuing strategies to improve our capital management and seek opportunities to grow our business. Japan faces some challenges such as a declining birth rate, an aging society and a shrinking population, while low growth has become normalized throughout the world. The environment we operate in has been affected by issues including significant inflationary price trends, instability in the financial system, geographical conflicts, growing awareness of environmental and social issues, and advances in digital technologies that enable the entry of new competitors in the financial sector. These developments are changing the business environment in significant ways and with unprecedented speed. MUFG seeks to meet these changes with clear visions and to make the most of these challenges as opportunities for growth. Under our medium-term business plan for the three years ending in the fiscal year ending March 31, 2027, we aim to leverage our extensive network and diverse solutions to provide value to our stakeholders around the world.
Implementation of Share Repurchase Program and Cancellation of Repurchased Shares
On November 14, 2024, the Board of Directors approved a share repurchase program under which we are authorized to repurchase up to the lesser of 230,000,000 shares of our common stock and ¥300.0 billion from November 15, 2024 to March 31, 2025. Under this share repurchase program, we repurchased 22,539,100 shares of our common stock for ¥40,781,952,504 in November 2024. Based on information derived from Japanese GAAP-based financial data and used to calculate our capital ratios under applicable Japanese regulations, we estimate that, assuming we repurchase ¥300.0 billion of our common stock pursuant to this program, each of our Common Equity Tier 1 capital ratio, Tier 1 capital ratio and total capital ratio as of September 30, 2024 would decline by approximately 0.3 percentage points. In addition, we canceled 270,000,000 shares of our common stock held in treasury on November 29, 2024.
We intend to agilely engage in repurchases of shares of our own stock as a means to return profits to shareholders and improve capital efficiency, taking into account our business performance and capital position, opportunities for growth investments, and market conditions including stock prices. As a general policy, we intend to cancel treasury shares to the extent that such shares exceed approximately 5% of our total issued shares (including treasury shares).
Issuances of TLAC Eligible Senior Debt
During the six months ended September 30, 2024, we obtained $2.5 billion, or ¥356.8 billion, and €1.0 billion, or ¥159.4 billion, aggregate principal amount of External TLAC eligible senior debt financing in the form of securities issuance and borrowings.
As of September 30, 2024, our External TLAC ratios were 24.80% on a risk-weighted assets basis and 9.67% on a total exposure basis. We are required to maintain External TLAC ratios of 18% on a risk-weighted assets basis and 7.10% on a total exposure basis as of the same date. See “Capital Adequacy” below and “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Total loss-absorbing capacity” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
Issuances of Basel III-Compliant Subordinated Debt
During the six months ended September 30, 2024, we obtained ¥170.0 billion aggregate principal amount of perpetual subordinated Additional Tier 1 debt financing in the form of securities issuance in Japan. These securities are subject to our discretion to cease interest payments and a write-down of the principal upon the occurrence of certain events, including when our Common Equity Tier 1 capital ratio declines below 5.125% (but, following any such write-down, the principal may be reinstated if the ratio improves and to the extent permitted by the Japanese banking regulator), when we are deemed to have reached the point of non-viability (PONV) or when we become subject to bankruptcy proceedings.
During the six months ended September 30, 2024, we obtained ¥194.0 billion aggregate principal amount of subordinated term Tier 2 debt financing in the form of securities issuance and borrowings in Japan. We can be exempted from the obligation to pay principal of and interest on the securities when we are deemed to have reached the PONV.
According to the FSA’s approach, PONV will be deemed to have been reached when the Prime Minister of Japan, following deliberation by Japan’s Financial Response Crisis Council pursuant to the Deposit Insurance Act of Japan (“DIA”), confirms that Specified Item 2 Measures need to be applied to MUFG under circumstances where its liabilities exceed or are likely to exceed its assets, or it has suspended or is likely to suspend payment of its obligations.
Acquisition of Link Administration Holdings Limited
On May 16, 2024, Mitsubishi UFJ Trust and Banking acquired all of the issued shares of Link Administration Holdings Limited, an Australian pension and stock administration company, for ¥113.5 billion in cash. The company's corporate name has been changed to MUFG Pension & Market Services Holdings Limited.
The acquisition of the global pension and stock administration functions of MUFG Pension & Market Services Holdings Limited is expected to further enable MUFG to accelerate its global business expansion, with access to Australian pension funds and global corporate clients for the Global Investor Services Business to offer a broad range of financial solutions, allowing it to strengthen its global reach, develop growth opportunities and expand the business scale.
For additional information, see Note 2 to our unaudited condensed consolidated financial statements.
Agreement to Acquire Shares of au Kabucom Securities and Sell Shares of au Jibun Bank
In November 2024, we announced a strategic plan that included our agreement with KDDI Corporation pursuant to which MUFG Bank will acquire 49% of the shares of au Kabucom Securities Co., Ltd. held by au Financial Holdings Corporation, a wholly owned subsidiary of KDDI. As a result of this acquisition and the planned transfer of the remaining 51% of the shares of au Kabucom Securities held by Mitsubishi UFJ Securities Holdings to MUFG Bank, au Kabucom Securities is expected to become a wholly owned subsidiary of MUFG Bank. These transactions are currently expected to be completed in January 2025, subject to regulatory approval, and au Kabucom Securities is expected to be subsequently renamed “Mitsubishi UFJ eSmart Securities Co., Ltd."
These transactions are part of our strategy to streamline and strengthen the MUFG Group's online securities business, with an aim to gain a more competitive position in the industry.
We also agreed with KDDI to sell all of the shares of au Jibun Bank Corporation, a subsidiary of KDDI, that we hold, representing 22% of the shares of the bank, to au Financial Holding. This transaction is currently expected to be completed in January 2025.
Commencement of Tender Offer for Shares of WealthNavi Inc.
On December 2, 2024, MUFG Bank commenced a tender offer to acquire all outstanding shares of WealthNavi Inc., a Japan-based online asset management service provider and an equity-method affiliate of MUFG Bank. MUFG Bank currently holds 9,110,000 shares, representing 15.13% based on a total of 60,221,736 shares, of WealthNavi, and seeks to acquire the remaining shares of WealthNavi for an aggregate purchase price of ¥99.7 billion, subject to conditions, including a minimum tender of 30,988,100 shares. The offer is expected to remain open through January 20, 2025, with a target closing date of January 27, 2025.
If MUFG Bank is unable to acquire all of the outstanding shares through the tender offer, MUFG Bank intends to carry out a squeeze-out process in order to make WealthNavi a wholly owned subsidiary of MUFG Bank.
Upon successful completion of this transaction, MUFG Bank intends to seek to enhance solutions for long-term financial needs of customers by achieving synergies with WealthNavi such as (i) acceleration of development of a more comprehensive asset management advisory platform and further enrichment of user interface and experience, (ii) expansion of asset management capabilities and wider name recognition under the MUFG brand, (iii) strengthening of the online securities business with WealthNavi and au Kabucom Securities complementing each other’s expertise and strengths, and (iv) utilization, where appropriate, of the methods and expertise of WealthNavi in business development and expansion management.
Accounting Changes and Recently Issued Accounting Pronouncements
See “Accounting Changes” and “Recently Issued Accounting Pronouncements” in Note 1 to our unaudited condensed consolidated financial statements included elsewhere in this Report.
Results of Operations
| | | | | | | | | | | | | | | | | |
| | Six months ended September 30, | | |
| | 2023
(As Adjusted) | | 2024 | | % Change |
| | (in billions, except percentages) |
| Interest income | ¥ | 3,310.8 | | | ¥ | 4,102.5 | | | 23.9 | % |
| Interest expense | 2,044.4 | | | 2,612.3 | | | 27.8 | |
| Net interest income | 1,266.4 | | | 1,490.2 | | | 17.7 | |
| Provision for credit losses | 71.9 | | | 128.6 | | | 78.8 | |
| Non-interest income | 664.3 | | | 1,693.9 | | | 155.0 | |
| Non-interest expense | 1,570.2 | | | 1,711.4 | | | 9.0 | |
| Income before income tax expense | 288.6 | | | 1,344.1 | | | 365.7 | |
| Income tax expense | 16.6 | | | 348.7 | | | N/M |
| Net income before attribution of noncontrolling interests | ¥ | 272.0 | | | ¥ | 995.4 | | | 266.0 | % |
| Net income (loss) attributable to noncontrolling interests | 38.1 | | | (63.8) | | | (267.6) | |
| Net income attributable to Mitsubishi UFJ Financial Group | ¥ | 233.9 | | | ¥ | 1,059.2 | | | 352.9 | % |
We reported net income of ¥1,059.2 billion for the current six-month period, compared to net income of ¥233.9 billion for the same period of the previous fiscal year, primarily due to an increase in non-interest income resulting from improvements in net trading account profits and net foreign exchange gains.
Net interest income increased 17.7% to ¥1,490.2 billion, with improvements in both domestic and foreign net interest income. Net domestic interest income for the current six-month period was ¥55.1 billion compared to ¥18.2 billion of net domestic interest loss for the same period of the previous fiscal year. Net foreign interest income increased 11.7% to ¥1,435.1 billion. Our total average interest rate spread decreased 0.31 percentage points to 0.64%. Our domestic average interest rate spread decreased 0.11 percentage points to 0.02%, while our foreign average interest spread increased 0.04 percentage points to 1.08%.
Provision for credit losses for the current six-month period was recorded in large part in the Krungsri segment resulting mainly from an increase during the current six-month period in non-performing loans at consumer finance companies acquired in the fiscal year ended March 31, 2024.
Non-interest income increased to ¥1,693.9 billion primarily reflecting net trading account profits and net foreign exchange gains, as mentioned above, partially offset by net investment securities losses.
Non-interest expense increased 9.0% mainly due to an increase in salaries and employee benefits expenses, primarily in foreign subsidiaries, and an increase in fees and commission expenses.
Net Interest Income
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | | | | | |
| 2023
(As Adjusted) | | 2024 | | % Change | | Change |
| Average balance(1) | | Interest
income
(expense) | | Average rate (Annualized) | | Average balance(1) | | Interest
income
(expense) | | Average rate (Annualized) | | Average
balance | | Interest
income
(expense) | | Average rate 2024 minus 2023 (percentage points) |
| (in billions, except percentages) |
| Interest-earning assets: | | | | | | | | | | | | | | | | | |
| Domestic | ¥ | 173,270.1 | | | ¥ | 592.4 | | | 0.68 | % | | ¥ | 230,368.3 | | | ¥ | 705.3 | | | 0.61 | % | | 33.0 | % | | 19.1 | % | | (0.07) | |
| Foreign | 109,868.5 | | | 2,718.4 | | | 4.93 | | | 119,680.1 | | | 3,397.2 | | | 5.66 | | | 8.9 | | | 25.0 | | | 0.73 | |
| Total | ¥ | 283,138.6 | | | ¥ | 3,310.8 | | | 2.33 | % | | ¥ | 350,048.4 | | | ¥ | 4,102.5 | | | 2.34 | % | | 23.6 | % | | 23.9 | % | | 0.01 | |
| Financed by: | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | |
| Domestic | ¥ | 222,074.0 | | | ¥ | (610.6) | | | 0.55 | % | | ¥ | 220,381.9 | | | ¥ | (650.2) | | | 0.59 | % | | (0.8) | % | | 6.5 | % | | 0.04 | |
| Foreign | 73,575.1 | | | (1,433.8) | | | 3.89 | | | 85,448.4 | | | (1,962.1) | | | 4.58 | | | 16.1 | | | 36.9 | | | 0.69 | |
| Total | ¥ | 295,649.1 | | | ¥ | (2,044.4) | | | 1.38 | % | | ¥ | 305,830.3 | | | ¥ | (2,612.3) | | | 1.70 | % | | 3.4 | % | | 27.8 | % | | 0.32 | |
| Non-interest-bearing liabilities (assets) | (12,510.5) | | | | | | | 44,218.1 | | | | | | | N/M | | | | |
| Total | ¥ | 283,138.6 | | | | | 1.44 | % | | ¥ | 350,048.4 | | | | | 1.49 | % | | 23.6 | % | | | | 0.05 | |
| Net interest income and interest rate spread | | | ¥ | 1,266.4 | | | 0.95 | % | | | | ¥ | 1,490.2 | | | 0.64 | % | | | | 17.7 | % | | (0.31) | |
| Net interest income as a percentage of total interest-earning assets | | | | | 0.89 | % | | | | | | 0.85 | % | | | | | | (0.04) | |
Note:
(1)Average balances are generally based on a daily average while a month-end average is used for certain average balances when it is not practicable to obtain applicable daily averages.
The following table shows details of the annualized interest rate spread by asset and liability category for the six months ended September 30, 2023 and 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | | | | | |
| 2023
(As Adjusted) | | 2024 | | % Change | | Change |
| Average balance(1) | | Interest | | Average rate (Annualized) | | Average balance(1) | | Interest | | Average rate (Annualized) | | Average
balance | | Interest income (expense) | | Average rate 2024 minus 2023 (percentage points) |
| (in billions, except percentages) |
| Assets: | | | | | | | | | | | | | | | | | |
| Interest-earning assets: | | | | | | | | | | | | | | | | | |
| Interest-earning deposits in other banks | ¥ | 47,704.1 | | | ¥ | 356.1 | | | 1.49 | % | | ¥ | 104,066.9 | | | ¥ | 372.4 | | | 0.71 | % | | 118.2 | % | | 4.6 | % | | (0.78) | |
| Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | 19,827.6 | | | 196.5 | | | 1.98 | | | 22,968.5 | | | 477.2 | | | 4.14 | | | 15.8 | | | 142.9 | | | 2.16 | |
| Trading account assets | 32,595.4 | | | 361.0 | | | 2.21 | | | 35,811.2 | | | 500.7 | | | 2.79 | | | 9.9 | | | 38.7 | | | 0.58 | |
| Investment securities | 61,170.9 | | | 355.8 | | | 1.16 | | | 57,523.9 | | | 404.1 | | | 1.40 | | | (6.0) | | | 13.6 | | | 0.24 | |
| Loans | 121,840.6 | | | 2,041.4 | | | 3.34 | | | 129,677.9 | | | 2,348.1 | | | 3.61 | | | 6.4 | | | 15.0 | | | 0.27 | |
| Total interest-earning assets | 283,138.6 | | | 3,310.8 | | | 2.33 | | | 350,048.4 | | | 4,102.5 | | | 2.34 | | | 23.6 | | | 23.9 | | | 0.01 | |
| Non-interest-earning assets: | | | | | | | | | | | | | | | | | |
| Cash and due from banks | 59,754.6 | | | | | | | 4,705.0 | | | | | | | (92.1) | | | | | |
| Other non-interest-earning assets | 56,574.3 | | | | | | | 60,106.5 | | | | | | | 6.2 | | | | | |
| Allowance for credit losses | (1,272.0) | | | | | | | (1,357.3) | | | | | | | 6.7 | | | | | |
| Total non-interest-earning assets | 115,056.9 | | | | | | | 63,454.2 | | | | | | | (44.8) | | | | | |
| Total assets | ¥ | 398,195.5 | | | | | | | ¥ | 413,502.6 | | | | | | | 3.8 | % | | | | |
| Liabilities and equity: | | | | | | | | | | | | | | | | | |
| Interest-bearing liabilities: | | | | | | | | | | | | | | | | | |
| Deposits | ¥ | 201,767.7 | | | ¥ | 1,148.1 | | | 1.13 | % | | ¥ | 209,873.5 | | | ¥ | 1,462.8 | | | 1.39 | % | | 4.0 | % | | 27.4 | % | | 0.26 | |
| Call money, funds purchased, and payables under repurchase agreements and securities lending transactions | 33,527.4 | | | 462.3 | | | 2.75 | | | 36,407.0 | | | 674.9 | | | 3.70 | | | 8.6 | | | 46.0 | | | 0.95 | |
| Due to trust account, other short-term borrowings, and trading account liabilities | 21,647.0 | | | 178.8 | | | 1.65 | | | 23,755.3 | | | 219.4 | | | 1.84 | | | 9.7 | | | 22.7 | | | 0.19 | |
| Long-term debt | 38,707.0 | | | 255.2 | | | 1.31 | | | 35,794.5 | | | 255.2 | | | 1.42 | | | (7.5) | | | — | | | 0.11 | |
| Total interest-bearing liabilities | 295,649.1 | | | 2,044.4 | | | 1.38 | | | 305,830.3 | | | 2,612.3 | | | 1.70 | | | 3.4 | | | 27.8 | | | 0.32 | |
| Non-interest-bearing liabilities | 84,192.7 | | | | | | | 87,654.4 | | | | | | | 4.1 | | | | | |
| Total equity | 18,353.7 | | | | | | | 20,017.9 | | | | | | | 9.1 | | | | | |
| Total liabilities and equity | ¥ | 398,195.5 | | | | | | | ¥ | 413,502.6 | | | | | | | 3.8 | % | | | | |
| Net interest income and interest rate spread | | | ¥ | 1,266.4 | | | 0.95 | % | | | | ¥ | 1,490.2 | | | 0.64 | % | | | | 17.7 | % | | (0.31) | |
| Net interest income as a percentage of total interest-earning assets | | | | | 0.89 | % | | | | | | 0.85 | % | | | | | | (0.04) | |
Note:
(1)Average balances are generally based on a daily average while a month-end average is used for certain average balances when it is not practicable to obtain applicable daily averages.
Net interest income for the current six-month period was ¥1,490.2 billion, an increase of 17.7% compared to the same period of the previous fiscal year. Net domestic interest income for the current six-month period was ¥55.1 billion compared to ¥18.2 billion of net domestic interest loss for the same period of the previous fiscal year. Net foreign interest income increased 11.7% to ¥1,435.1 billion. Our total average interest rate spread (which is the average interest rate on interest-earning assets less the average interest rate on interest-bearing liabilities) decreased 0.31 percentage points.
Domestic interest income increased 19.1% to ¥705.3 billion mainly due to a 33.0% increase in the average balance of domestic interest-earning assets. The average interest rate on domestic interest-earning assets decreased 0.07 percentage points to 0.61%. Domestic interest expense increased 6.5% to ¥650.2 billion mainly due to a 0.04 percentage point increase to 0.59% in the average interest rate on domestic interest-bearing liabilities. The average balance of domestic interest-bearing liabilities decreased 0.8%, mainly reflecting decreases in call money, funds purchased, and payables under repurchase agreements, payables under securities lending transactions, due to trust account and long-term debt, despite increases in the average balance of deposits, other short-term borrowings and trading account securities.
Foreign interest income increased 25.0% to ¥3,397.2 billion, reflecting a 8.9% increase in the average balance of foreign interest-earning assets and a 0.73 percentage point increase to 5.66% in the average interest rate on foreign interest-earning assets. Foreign interest expense increased 36.9% to ¥1,962.1 billion, reflecting 16.1% increase in the average balance of foreign interest-bearing liabilities and a 0.69 percentage point increase to 4.58% in the average interest rate on foreign interest-bearing liabilities. The impact of the interest rate increase on foreign interest income was larger than the impact of the interest rate increase on foreign interest expense primarily because the average balance of foreign interest-earning assets was approximately 1.4 times the average balance of foreign interest-bearing liabilities.
Provision for credit losses
We recorded ¥128.6 billion of provision for credit losses for the current six-month period compared to ¥71.9 billion of provision for credit losses for the same period of the previous fiscal year. For the current six-month period, ¥76.4 billion of provision for credit losses was recorded in the Krungsri segment, and ¥14.7 billion of provision for credit losses was recorded in the Commercial segment. The provision for credit losses in the Krungsri segment was mainly due to an increase during the current six-month period in non-performing loans at consumer finance companies acquired in the fiscal year ended March 31, 2024. The provision for credit losses in the Commercial segment primarily related to a large borrower in the foreign infrastructure industry.
Non-Interest Income
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | |
| 2023
(As Adjusted) | | 2024 | | % Change |
| (in billions, except percentages) |
| Fees and commissions income: | | | | | |
| Fees and commissions on deposits | ¥ | 18.3 | | | ¥ | 18.4 | | | 0.8 | % |
| Fees and commissions on remittances and transfers | 73.5 | | | 78.4 | | | 6.7 | |
| Fees and commissions on foreign trading business | 36.9 | | | 42.6 | | | 15.4 | |
| Fees and commissions on credit card business | 120.2 | | | 128.5 | | | 6.9 | |
| Fees and commissions on security-related services | 133.1 | | | 170.0 | | | 27.7 | |
| Fees and commissions on administration and management services for investment funds | 150.7 | | | 162.5 | | | 7.8 | |
| Trust fees | 62.7 | | | 69.5 | | | 10.8 | |
| Guarantee fees | 25.3 | | | 26.7 | | | 5.5 | |
| Insurance commissions | 29.9 | | | 38.1 | | | 27.3 | |
| Fees and commissions on real estate business | 22.3 | | | 28.2 | | | 26.1 | |
| Other fees and commissions | 213.3 | | | 250.1 | | | 17.3 | |
| Total | 886.2 | | | 1,013.0 | | | 14.3 | |
| Foreign exchange gains (losses) —net | (324.9) | | | 202.8 | | | 162.4 | |
| Trading account profits (losses)—net: | | | | | |
| Net profits (losses) on interest rate and other derivative contracts | (543.2) | | | 104.7 | | | 119.3 | |
| Net profits (losses) on trading account securities, excluding derivatives | (402.2) | | | 432.6 | | | 207.5 | |
| Total | (945.4) | | | 537.3 | | | 156.8 | |
| Investment securities gains (losses)—net: | | | | | |
| Net gains on sales of available-for-sale debt securities | 52.6 | | | 2.8 | | | (94.8) |
| Reversal of impairment losses (impairment losses) on available-for-sale debt securities | 0.2 | | | (12.8) | | | N/M |
| Net gains (losses) from marketable equity securities | 691.8 | | | (467.8) | | | (167.6) | |
| Other | 1.5 | | | (7.3) | | | N/M |
| Total | 746.1 | | | (485.1) | | | (165.0) | |
| Equity in earnings of equity method investees—net | 215.0 | | | 316.3 | | | 47.1 | |
| Other non-interest income | 87.3 | | | 109.6 | | | 25.7 | |
| Total non-interest income | ¥ | 664.3 | | | ¥ | 1,693.9 | | | 155.0 | % |
Non-interest income improved ¥1,029.6 billion to ¥1,693.9 billion mainly due to net trading account profits and net foreign exchange gains, partially offset by net investment securities losses.
Fees and commissions income
Fees and commissions income for the current six-month period increased 14.3% compared to the same period of the previous fiscal year, reflecting an overall increase in fees and commissions income, including in particular fees and commissions on security-related services in our securities subsidiaries.
Net foreign exchange gains (losses)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | |
| 2023
(As Adjusted) | | 2024 | | % Change |
| (in billions, except percentages) |
| Foreign exchange gains (losses)—net: | | | | | |
| Net foreign exchange gains (losses) on derivative contracts | ¥ | (387.7) | | | ¥ | 280.7 | | | 172.4 | % |
| Net foreign exchange gains (losses) on other than derivative contracts | (1,699.6) | | | 738.1 | | | 143.4 | |
| Net foreign exchange gains (losses) related to the fair value option | 1,762.4 | | | (816.0) | | | (146.3) | |
| Total | ¥ | (324.9) | | | ¥ | 202.8 | | | 162.4 | % |
Net foreign exchange gains (losses) consist of the following:
•Net foreign exchange gains (losses) on derivative contracts are net gains (losses) primarily on currency derivative instruments entered into for trading purposes.
•Net foreign exchange gains (losses) on other than derivative contracts include foreign exchange trading gains (losses) as well as transaction gains (losses) on the translation into Japanese yen of monetary assets and liabilities denominated in foreign currencies. The transaction gains (losses) on the translation into Japanese yen fluctuate from period to period depending upon the spot rates at the end of each reporting period. In principle, all transaction gains (losses) on translation of monetary assets and liabilities denominated in foreign currencies are included in current earnings.
•Net foreign exchange gains (losses) related to the fair value option include transaction gains (losses) on the translation into Japanese yen of securities under the fair value option. See Note 18 to our unaudited condensed consolidated financial statements.
Net foreign exchange gains for the current six-month period mainly reflected net foreign exchange gains on other than derivative contracts resulting from the positive foreign exchange translation impact on transactions in monetary liabilities denominated in foreign currencies in our commercial banking subsidiaries as the Japanese yen appreciated against other major currencies on a spot rate basis between March 31, 2024 and September 30, 2024. Net foreign exchange gains on derivative contracts for the current six-month period mainly reflected an increase in such gains in our trust banking subsidiaries. These gains were partially offset by net foreign exchange losses related to the fair value option applied to foreign currency-denominated trading account securities such as U.S. Treasury bonds as the Japanese yen appreciated against the U.S. dollar from ¥151.41 to the U.S. dollar as of March 31, 2024 to ¥142.73 to the U.S. dollar as of September 30, 2024.
Net trading account profits (losses)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | |
| 2023
(As Adjusted) | | 2024 | | % Change |
| (in billions, except percentages) |
| Trading account profits (losses)—net: | | | | | |
| Net profits (losses) on interest rate and other derivative contracts | | | | | |
| Interest rate contracts | ¥ | (223.3) | | | ¥ | (103.2) | | | 53.8 | % |
| Equity contracts | (267.7) | | | 215.1 | | | 180.4 | |
| Commodity contracts | (0.4) | | | 0.2 | | | 142.8 | |
| Credit derivatives | (20.3) | | | 2.2 | | | 111.0 | |
| Other | (31.5) | | | (9.6) | | | 69.4 | |
| Total | (543.2) | | | 104.7 | | | 119.3 | |
| Net profits (losses) on trading account securities, excluding derivatives | | | | | |
| Trading account securities | 194.3 | | | 48.1 | | | (75.3) | |
| Trading account securities under the fair value option | (596.5) | | | 384.5 | | | 164.5 | |
| Total | (402.2) | | | 432.6 | | | 207.5 | |
| Total | ¥ | (945.4) | | | ¥ | 537.3 | | | 156.8 | % |
Trading account assets and liabilities are carried at fair value and changes in the value of trading account assets and liabilities are recorded in net trading account profits (losses). Activities reported in our net trading account profits (losses) can generally be classified into two categories:
•trading purpose activities, which are conducted mainly for the purpose of generating profits either through transaction fees or arbitrage gains and involve frequent and short-term selling and buying of securities, commodities or others; and
•trading account assets relating to the application of certain accounting rules, which are generally not related to trading purpose activities, but simply classified as trading accounts due to the application of certain accounting rules.
Of the two categories, trading account assets relating to the application of certain accounting rules represent a larger portion of our trading account profits for the current six-month period.
We generally do not separate, for financial reporting purposes, customer originated trading activities from non-customer related, proprietary trading activities. When an order for a financial product is placed by a customer, a dealer offers a price which includes certain transaction fees, often referred to as the “margin” to the market price. The margin is determined by considering factors such as administrative costs, transaction amount and liquidity of the applicable financial product. Once the customer agrees to the offered price, the deal is completed, and the position is recorded in our ledger as a single entry without any separation of components. To manage the risk relating to the customer side position, we often enter into an offsetting transaction with the market. Unrealized gains and losses as of the period-end for both the customer side position and the market side position are recorded within the same trading account profits and losses.
Net trading account profits (losses) consist of net profits (losses) on interest rate and other derivative contracts and net profits (losses) on trading account securities, excluding derivatives.
Net profits (losses) on interest rate and other derivative contracts are reported for net profits (losses) on derivative instruments which primarily relate to trading purpose activities and include:
•Interest rate contracts: Interest rate contracts are mainly utilized to manage interest rate risks which could arise from mismatches between assets and liabilities resulting from customer originated trading activities;
•Equity contracts: Equity contracts are mainly utilized to manage the risk that would arise from price fluctuations of stocks held in connection with customer transactions;
•Commodity contracts: Commodity contracts are mainly utilized to meet customers’ demand for hedging the risks relating to commodity price fluctuations in their transactions, and to diversify our portfolio of derivative instruments held for trading purposes; and
•Credit derivatives: Credit derivatives are mainly utilized as a part of our credit portfolio risk management.
Derivative instruments for trading purposes also include those used as hedges of net exposures rather than for specifically identified assets or liabilities, which do not meet the specific criteria for hedge accounting.
Net profits (losses) on trading account securities, excluding derivatives, consist of:
•Net profits (losses) on trading account securities, which primarily consist of gains and losses on trading and valuation of trading securities which relate to trading purpose activities. Net profits (losses) on investment securities held by certain consolidated variable interest entities, or VIEs, are included in accordance with the applicable accounting rules.
•Net profits (losses) on trading account securities under the fair value option, which are classified into trading accounts profits (losses) in accordance with certain accounting rules.
Net trading account profits for the current six-month period, compared to net losses for the same period of the previous fiscal year, reflected improvements from net losses to net profits on interest rate and other derivative contracts and from net losses to net profits on trading account securities, excluding derivatives. The improvement from net losses to net profits on equity contracts was mainly due to an increase of ¥302 billion in net realized gains on equity swaps in our banking subsidiaries for the current six-month period compared to the same period of the previous fiscal year. Net profits on trading account securities excluding derivatives for the current six-month period reflected an increase of ¥568 billion in net unrealized gains on trading account securities under the fair value option in our banking subsidiaries, primarily reflecting an improvement in unrealized losses on foreign bonds due to falling interest rates.
Net investment securities gains (losses)
Net investment securities gains (losses) include net gains (losses) on sales of available-for-sale debt securities, impairment losses on available-for-sale debt securities, and net gains (losses) from marketable equity securities. Impairment loss on an available-for-sale debt security is recognized as part of investment securities losses if the fair value of such security is below its amortized cost basis and (1) such debt security is held by us with the intent to sell or (2) it is more likely than not that we will be required to sell such debt security before recovering its amortized cost basis. In other circumstances where the fair value of available-for-sale debt securities is less than the amortized cost basis, we recognize the credit component of the impairment loss as part of investment securities losses, and record an allowance for credit losses to the same extent, while recording the noncredit component of the impairment loss in accumulated other comprehensive losses. Net gains (losses) from marketable equity securities include net gains (losses) on sales of marketable equity securities as well as unrealized gains (losses) on such securities.
Net investment securities losses for the current six-month period were ¥485.1 billion, compared to net gains of ¥746.1 billion for the same period of the prior fiscal year. This was mainly due to net losses on marketable equity securities reflecting realized and unrealized losses on equity securities in Japan for the six-month period ended September 30, 2024.
Net equity in earnings of equity method investees
Net equity in earnings of equity method investees for the current six-month period was ¥316.3 billion, compared to ¥215.0 billion for the same period of the prior fiscal year. This improvement reflected higher earnings of our equity method investees, including Morgan Stanley.
Non-Interest Expense
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | |
| 2023
(As Adjusted) | | 2024 | | % Change |
| (in billions, except percentages) |
| Salaries and employee benefits | ¥ | 628.8 | | | ¥ | 714.8 | | | 13.7 | % |
| Occupancy expenses—net | 77.7 | | | 78.8 | | | 1.4 | |
| Fees and commissions expenses | 190.2 | | | 203.7 | | | 7.1 | |
| Outsourcing expenses, including data processing | 161.8 | | | 154.4 | | | (4.6) | |
| Depreciation of premises and equipment | 36.2 | | | 41.7 | | | 15.2 | |
| Amortization of intangible assets | 142.3 | | | 145.4 | | | 2.2 | |
| Insurance premiums, including deposit insurance | 45.1 | | | 48.6 | | | 7.9 | |
| Communications | 29.7 | | | 31.4 | | | 5.6 | |
| Taxes and public charges | 53.6 | | | 58.9 | | | 9.8 | |
| Reversal of off-balance sheet credit instruments | (4.0) | | | (1.3) | | | 66.5 | |
| Other non-interest expenses | 208.8 | | | 235.0 | | | 12.5 | |
| Total non-interest expense | ¥ | 1,570.2 | | | ¥ | 1,711.4 | | | 9.0 | % |
Non-interest expense increased 9.0% mainly due to an increase in salaries and employee benefits expenses, primarily in foreign subsidiaries, and an increase in fees and commission expenses, partially offset by the impact of the absence of the impairment of intangible assets associated with software previously recorded and included in other non-interest expense for the six months ended September 30, 2023.
Salaries and employee benefits
Salaries and employee benefits increased 13.7% mainly due to increases primarily in personnel costs at overseas subsidiaries and the impact of the acquisitions of overseas subsidiaries.
Fees and commissions expenses
Fees and commissions expenses increased 7.1% mainly due to an increase in administrative service fees and commissioned research expenses related to the asset management business.
Income Tax Expense (Benefit)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, | | |
| 2023
(As Adjusted) | | 2024 | | % Change |
| (in billions, except percentages) |
| Income (loss) before income tax expense (benefit) | ¥ | 288.6 | | | ¥ | 1,344.1 | | | 365.7 | % |
| Income tax expense (benefit) | 16.6 | | | 348.7 | | | N/M |
| Effective income tax rate | 5.8 | % | | 25.9 | % | | — | |
| Combined normal effective statutory tax rate | 30.6 | % | | 30.6 | % | | — | |
Income taxes applicable to us in Japan are imposed by the national, prefectural and municipal governments, and the aggregate of these taxes resulted in a combined normal effective statutory tax rate of 30.6% for the six months ended September 30, 2023 and 2024. Foreign subsidiaries are subject to income taxes of the jurisdictions in which they operate. These taxes are reflected in the effective income tax rate.
For the six months ended September 30, 2024, the effective income tax rate was 25.9%, which was 4.7 percentage points lower than the combined normal effective statutory tax rate of 30.6%. This lower effective income tax rate primarily reflected our receipt of nontaxable dividends, which had the effect of decreasing the effective income tax rate by 4.0 percentage points for the six months ended September 30, 2024. Under Japanese tax law, a certain percentage of dividends received is considered nontaxable and excluded from gross revenue in computing taxable income. This creates a permanent difference between our taxable income for Japanese tax purposes and our income before income tax expense reported under U.S. GAAP. Another factor contributing to the lower effective income tax rate was foreign tax credits, which resulted in a decrease of ¥31.4 billion in income tax expense and a decrease of 2.3 percentage points in the effective income tax rate for the six months ended September 30, 2024.
For the six months ended September 30, 2023, the effective income tax rate was 5.8%, which was 24.8 percentage points lower than the combined normal effective statutory tax rate of 30.6%. This lower effective income tax rate primarily reflected our receipt of nontaxable dividends, which had the effect of decreasing the effective income tax rate by 13.1 percentage points for the six months ended September 30, 2023. Under Japanese tax law, a certain percentage of dividends received is considered nontaxable and excluded from gross revenue in computing taxable income. This creates a permanent difference between our taxable income for Japanese tax purposes and our income before income tax expense reported under U.S. GAAP. Another factor contributing to the lower effective income tax rate was due to foreign tax credit, which resulted in a decrease of ¥15.6 billion in income tax expense and a decrease of 5.4 percentage points in the effective income tax rate for the six months ended September 30, 2023.
Business Segment Analysis
We measure the performance of each of our business segments primarily in terms of “operating profit.” Operating profit and other segment information in this Report are based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information are not consistent with our unaudited condensed consolidated financial statements prepared in accordance with U.S. GAAP. For example, operating profit does not reflect items such as a component of the provision for (reversal of) credit losses (primarily equivalent to the formula allowance under U.S. GAAP), foreign exchange gains (losses) and investment securities gains (losses). For a reconciliation of operating profit under the internal management reporting system to income before income tax expense shown on the unaudited condensed consolidated statements of operations, see Note 17 to our unaudited condensed consolidated financial statements. We do not use information on the segments’ total assets to allocate our resources and assess performance. Accordingly, business segment information on total assets is not presented. However, in order to ensure more efficient management of resources, and to strengthen controls on profits and losses in each business group, we allocate fixed assets of both MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis to each business unit. Accordingly, such fixed assets allocated to business groups are presented below.
We made modifications to our internal management accounting rules and practices, effective April 1, 2024, including reorganizing the Digital Service Business Group and the Retail & Commercial Banking Business Group into the Retail & Digital Business Group and the Commercial Banking & Wealth Management Business Group and changing the internal accounting rules for headquarters and other overhead expenses.
These modifications had the following impact on our previously reported business segment information for the six months ended September 30, 2023:
•reducing the operating loss of Other and increasing the operating profits of the Global Commercial Banking Business Group by ¥84.6 billion and ¥0.2 billion, respectively;
•reducing the operating profits of the Global Corporate & Investment Banking Business Group, the Japanese Corporate & Investment Banking Business Group, the Retail & Digital Business Group, the Commercial Banking & Wealth Management Business Group, the Global Markets Business Group and the Asset Management & Investor Services Business Group by ¥39.4 billion, ¥20.7 billion, ¥17.4 billion, ¥6.7 billion, ¥4.3 billion and ¥1.9 billion, respectively;
•increasing the fixed assets, the increase in fixed assets and the depreciation of the Retail & Digital Business Group by ¥58.6 billion, ¥6.0 billion and ¥4.3 billion, of the Japanese Corporate & Investment Banking Business Group by ¥2.5 billion, ¥0.3 billion and ¥0.2 billion, respectively, and of the Global Markets Business Group by ¥2.5 billion, ¥0.2 billion and ¥0.1 billion, as well as increasing the fixed assets of the Global Corporate & Investment Banking Business Group by ¥0.8 billion and of the Global Commercial Banking Business Group by ¥0.2 billion, respectively; and
•reducing the fixed assets, the increase in fixed assets and the depreciation of the Commercial Banking & Wealth Management Business Group by ¥40.7 billion, ¥3.9 billion and ¥2.9 billion, respectively, and of Other by ¥23.9 billion, ¥2.6 billion and ¥1.7 billion, respectively.
Prior period business segment information has been restated to enable comparison between the relevant amounts for the six months ended September 30, 2023 and 2024.
Starting from the fiscal year ending March 31, 2025, the fiscal year of Krungsri, an entity included in the Global Commercial Banking Business Group, has been changed from the previous January to December period to an April to March period for consolidation purposes. Given the treatment of reporting lag changes under Japanese GAAP, there is no retrospective application of the change. In connection with this change, the segment amounts prepared in accordance with Japanese GAAP for the six-month period ended September 30, 2024, reflect Krungsri's relevant amounts for the nine months ended September 30, 2024. For a discussion of the treatment of reporting lag changes under U.S. GAAP, see Note 1 to our unaudited condensed consolidated financial statements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Customer Business | | | | | | |
Six months ended September 30, 2023 | Retail & Digital Business Group | | Commercial Banking & Wealth management Business Group | | Japanese Corporate & Investment Banking Business Group | | Global Commercial Banking Business Group | | Asset Management & Investor Services Business Group | | Global Corporate & Investment Banking Business Group | | Total | | Global Markets Business Group | | Other | | Total |
| | | | (in billions) |
| Net revenue | ¥ | 409.3 | | | ¥ | 283.6 | | | ¥ | 455.9 | | | ¥ | 310.8 | | | ¥ | 205.7 | | | ¥ | 409.0 | | | ¥ | 2,074.3 | | | ¥ | 376.5 | | | ¥ | 44.6 | | | ¥ | 2,495.4 | |
BK and TB(1): | 155.7 | | | 189.5 | | | 371.7 | | | 19.5 | | | 56.8 | | | 367.3 | | | 1,160.5 | | | 226.5 | | | 122.8 | | | 1,509.8 | |
| Net interest income | 123.8 | | | 93.7 | | | 230.9 | | | 19.1 | | | 6.5 | | | 186.7 | | | 660.7 | | | 97.3 | | | 128.5 | | | 886.5 | |
| Net fees | 30.2 | | | 78.7 | | | 104.7 | | | — | | | 50.3 | | | 163.1 | | | 427.0 | | | (8.5) | | | (9.7) | | | 408.8 | |
| Other | 1.7 | | | 17.1 | | | 36.1 | | | 0.4 | | | — | | | 17.5 | | | 72.8 | | | 137.7 | | | 4.0 | | | 214.5 | |
| Other than BK and TB | 253.6 | | | 94.1 | | | 84.2 | | | 291.3 | | | 148.9 | | | 41.7 | | | 913.8 | | | 150.0 | | | (78.2) | | | 985.6 | |
| Operating expenses | 310.7 | | | 202.3 | | | 182.2 | | | 174.6 | | | 147.6 | | | 204.1 | | | 1,221.5 | | | 149.0 | | | 52.6 | | | 1,423.1 | |
| Operating profit (loss) | ¥ | 98.6 | | | ¥ | 81.3 | | | ¥ | 273.7 | | | ¥ | 136.2 | | | ¥ | 58.1 | | | ¥ | 204.9 | | | ¥ | 852.8 | | | ¥ | 227.5 | | | ¥ | (8.0) | | | ¥ | 1,072.3 | |
Fixed assets(2) | ¥ | 231.4 | | | ¥ | 170.3 | | | ¥ | 163.5 | | | ¥ | 1.5 | | | ¥ | 22.1 | | | ¥ | 169.2 | | | ¥ | 758.0 | | | ¥ | 110.9 | | | ¥ | 508.0 | | | ¥ | 1,376.9 | |
Increase in fixed assets(3) | 25.1 | | | 16.9 | | | 22.6 | | | 0.2 | | | 7.3 | | | 15.9 | | | 88.0 | | | 13.3 | | | 12.7 | | | 114.0 | |
Depreciation(3) | ¥ | 11.3 | | | ¥ | 9.1 | | | ¥ | 21.4 | | | ¥ | 0.1 | | | ¥ | 4.0 | | | ¥ | 21.8 | | | ¥ | 67.7 | | | ¥ | 15.6 | | | ¥ | 6.9 | | | ¥ | 90.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Customer Business | | | | | | |
Six months ended September 30, 2024 | Retail & Digital Business Group | | Commercial Banking & Wealth management Business Group | | Japanese Corporate & Investment Banking Business Group | | Global Commercial Banking Business Group | | Asset Management & Investor Services Business Group | | Global Corporate & Investment Banking Business Group | | Total | | Global Markets Business Group | | Other | | Total |
| | | | (in billions) |
| Net revenue | ¥ | 457.1 | | | ¥ | 339.1 | | | ¥ | 502.9 | | | ¥ | 577.3 | | | ¥ | 244.4 | | | ¥ | 433.1 | | | ¥ | 2,553.9 | | | ¥ | 361.2 | | | ¥ | (10.3) | | | ¥ | 2,904.8 | |
BK and TB(1): | 190.3 | | | 227.7 | | | 405.9 | | | 19.8 | | | 67.7 | | | 383.1 | | | 1,294.5 | | | 227.4 | | | 41.1 | | | 1,563.0 | |
| Net interest income | 149.3 | | | 122.2 | | | 253.1 | | | 19.8 | | | 12.6 | | | 206.7 | | | 763.7 | | | 56.9 | | | 84.6 | | | 905.2 | |
| Net fees | 39.3 | | | 85.4 | | | 119.0 | | | — | | | 55.0 | | | 161.3 | | | 460.0 | | | (12.0) | | | (13.7) | | | 434.3 | |
| Other | 1.7 | | | 20.1 | | | 33.8 | | | — | | | 0.1 | | | 15.1 | | | 70.8 | | | 182.5 | | | (29.8) | | | 223.5 | |
| Other than BK and TB | 266.8 | | | 111.4 | | | 97.0 | | | 557.5 | | | 176.7 | | | 50.0 | | | 1,259.4 | | | 133.8 | | | (51.4) | | | 1,341.8 | |
| Operating expenses | 328.4 | | | 210.8 | | | 188.3 | | | 302.2 | | | 175.5 | | | 208.4 | | | 1,413.6 | | | 158.7 | | | 38.0 | | | 1,610.3 | |
| Operating profit (loss) | ¥ | 128.7 | | | ¥ | 128.3 | | | ¥ | 314.6 | | | ¥ | 275.1 | | | ¥ | 68.9 | | | ¥ | 224.7 | | | ¥ | 1,140.3 | | | ¥ | 202.5 | | | ¥ | (48.3) | | | ¥ | 1,294.5 | |
Fixed assets(2) | ¥ | 250.7 | | | ¥ | 179.7 | | | ¥ | 165.5 | | | ¥ | 1.8 | | | ¥ | 21.3 | | | ¥ | 158.2 | | | ¥ | 777.2 | | | ¥ | 95.3 | | | ¥ | 492.7 | | | ¥ | 1,365.2 | |
Increase in fixed assets(3) | 22.5 | | | 17.3 | | | 20.5 | | | 0.3 | | | 4.0 | | | 10.6 | | | 75.2 | | | 10.7 | | | 12.0 | | | 97.9 | |
Depreciation(3) | ¥ | 15.9 | | | ¥ | 10.2 | | | ¥ | 20.4 | | | ¥ | 0.1 | | | ¥ | 3.9 | | | ¥ | 17.8 | | | ¥ | 68.3 | | | ¥ | 15.4 | | | 6.5 | | | ¥ | 90.2 | |
Notes:
(1)“BK and TB” is a sum of MUFG Bank on a stand-alone basis (BK) and Mitsubishi UFJ Trust and Banking on a stand-alone basis (TB).
(2)Fixed assets in the above table are based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices, and the amounts correspond to premises and equipment-net, intangible assets-net and goodwill of BK and TB. Fixed assets of MUFG and other consolidated subsidiaries and Japanese GAAP consolidation adjustments amounting to ¥1,344.5 billion as of September 30, 2023 and ¥1,820.3 billion as of September 30, 2024, respectively, are not allocated to each business segment when determining the allocation of management resources and assessing performance and, therefore, such amounts are not included in the table above.
(3)These amounts are related to the fixed assets of BK and TB included in the table above.
Retail & Digital Business Group—Covers the businesses of Mitsubishi UFJ NICOS, other consumer finance companies, and MUFG Bank with individual customers (excluding wealth management customers) and corporate customers in Japan through the three channels under the concept of “Real (Face-to-Face) × Remote × Digital”. Its net revenue mainly consists of interest income from lending and deposit-taking operations and fees relating to credit card settlement and consumer financing products and services.
Operating profit increased mainly due to an increase in interest income from lending and deposit-taking operations in the rising interest rate environment in Japan and the recovery in the consumer finance business driven by an increase in demand for loans.
Commercial Banking & Wealth Management Business Group—Covers small and medium sized enterprise clients and wealth management clients in Japan, offering an extensive array of commercial banking, trust banking and securities products and services. Its net revenue mainly consists of interest income from lending and deposit-taking operations and fees relating to domestic and foreign exchange settlement services and wealth management solutions, including asset management, asset and business succession transfer and real estate services.
Operating profit increased, primarily reflecting the positive impact of changes in market conditions such as an increase in interest income from lending and deposit-taking operations in the rising interest rate environment in Japan and an increase in fee income from the wealth management business driven by the strong stock market performance.
Japanese Corporate & Investment Banking Business Group—Covers the large Japanese corporate businesses. This business group offers large Japanese corporations advanced financial solutions designed to respond to their diversified and globalized needs and to contribute to their business and financial strategies through the global network of our group companies. Its net revenue mainly consists of interest income from lending and deposit-taking operations and fees relating to financing, investment banking, real estate and stock transfer services for large Japanese corporate customers.
Operating profit increased primarily due to an increase in interest income from lending and deposit-taking operations reflecting higher Japanese yen interest rates and improved lending spreads as well as increases in fee income from the solutions and M&A-related businesses.
Global Commercial Banking Business Group—Covers the retail and commercial banking businesses of Krungsri and PT Bank Danamon Indonesia, Tbk. This business group offers a comprehensive array of financial products and services such as loans, deposits, fund transfers, investments and asset management services for local retail, small and medium-sized enterprise, and corporate customers across the Asia-Pacific region. Its revenue mainly consists of interest income from lending and deposit-taking operations and fees from remittances and transfers, consumer finance and wealth-related services for individual and small to medium-sized corporate customers of Krungsri and Bank Danamon.
Operating profit of Krungsri increased mainly reflecting the contribution of acquired businesses as well as the contribution of Krungsri's operating profit for the quarter ended March 31, 2024, in addition to the six-month period ended September 30, 2024, as described above. The impact of the above-described change in the financial reporting period of Krungsri for consolidation in our financial statements represented approximately three-fifths of the total increase in the business group's operating profit. Operating profit of Bank Danamon increased primarily due to the growth in the automotive loan portfolio of PT Adira Finance Dinamika Multi Finance Tbk, an Indonesia-based subsidiary of Bank Danamon.
Asset Management & Investor Services Business Group—Covers the asset management and asset administration businesses of Mitsubishi UFJ Trust and Banking, MUFG Bank and First Sentier Investors. By integrating the trust banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank, the business group offers a full range of asset management and administration services for corporations and pension funds, including pension fund management and administration, advice on pension structures, and payments to beneficiaries, and also offers investment trusts for retail customers. Its net revenue mainly consists of fees from asset management and administration services for products, such as pension trusts and mutual funds.
Operating profit increased primarily due to the impact of growth in assets under management reflecting favorable market conditions and net inflows of funds into ETFs in Japan, expansion of bundled investor services, and the contribution of acquired businesses, partially offset by the impact of the absence of the performance-based asset management fees recorded in First Sentier Investors for the six months ended September 30, 2023.
Global Corporate & Investment Banking Business Group—Covers the global corporate, investment and transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global network of offices and branches, this business group provides large non-Japanese corporate and financial institution customers outside Japan with a comprehensive set of solutions that meet their increasingly diverse and sophisticated financing needs. Its net revenue mainly consists of interest income from lending and deposit-taking operations and fees and commissions from investment banking services and foreign exchange and derivatives transactions.
Operating profit increased mainly due to an increase in project finance fees mainly in the United States and the growth in net interest income from lending operations with higher lending spreads.
Global Markets Business Group—Covers the customer business and the treasury operations of MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business includes sales and trading in fixed income instruments, currencies, equities and other investment products as well as origination and distribution of financial products. The treasury operations include asset and liability management as well as global investments for the MUFG Group.
Operating profit decreased mainly due to lower bond trading volume and increased non-Japanese yen-denominated funding costs, despite strong performance in foreign currency exchange products and capital gains resulting from market volatility.
Other—Consists mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues among business segments is also reflected in Other.
Financial Condition
Total Assets
Our total assets as of September 30, 2024 were ¥392,937.8 billion, a decrease of ¥4,945.7 billion from ¥397,883.5 billion as of March 31, 2024, mainly due to a ¥4,460.1 billion decrease in available-for-sale debt securities, a ¥2,104.6 billion decrease in held-to-maturity debt securities, a ¥1,618.2 billion decrease in interest-earning deposits in other banks, and a ¥1,007.1 billion decrease in equity securities. These decreases were partially offset by a ¥4,379.1 billion increase in trading account assets.
Loan Portfolio
The following table sets forth our loans outstanding, before deduction of allowance for credit losses, by class. We classify our loan portfolio into the following portfolio segments—Commercial, Residential, Card, Krungsri, and Other based on the grouping to determine the allowance for credit losses. We further classify the Commercial segment into Domestic and Foreign classes based on initial measurement attributes, risk characteristics, and method of monitoring and assessing credit risk. The Domestic Commercial segment includes commercial loans to borrowers in Japan, and the Foreign Commercial segment includes commercial loans other than those included in the Domestic Commercial, Krungsri and Other segments. The Residential segment includes housing loans to borrowers in Japan, and the Card segment includes consumer loans to borrowers in Japan. The Krungsri segment includes loans held by Krungsri and its subsidiaries. The Other segment mainly consists of Bank Danamon.
| | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) | | September 30, 2024 | | % Change |
| (in billions, except percentages) |
| Commercial | | | | | |
| Domestic | ¥ | 57,498.3 | | | ¥ | 62,180.6 | | | 8.1 | % |
| Foreign | 47,353.2 | | | 44,636.3 | | | (5.7) | |
| Residential | 12,497.4 | | | 12,421.0 | | | (0.6) | |
| Card | 484.9 | | | 484.9 | | | 0.0 | |
| Krungsri | 8,805.1 | | | 9,015.7 | | | 2.4 | |
| Other | 1,758.1 | | | 1,992.1 | | | 13.3 | |
Total(1) | 128,397.0 | | | 130,730.6 | | | 1.8 | |
| Unearned income, unamortized premium—net and deferred loan fees—net | (486.7) | | | (485.2) | | | 0.3 | |
Total(1) | ¥ | 127,910.3 | | | ¥ | 130,245.4 | | | 1.8 | % |
Note:
(1)The above table includes loans held for sale of ¥971.5 billion and ¥948.2 billion as of March 31, 2024 and September 30, 2024, respectively, which are carried at the lower of cost or fair value.
Our total loan balance as of September 30, 2024 increased 1.8% compared to March 31, 2024. As of September 30, 2024, our total loans accounted for 33.1% of total assets, compared to 32.1% of total assets as of March 31, 2024. Our domestic commercial loan balance increased mainly due to an increase in loans to the Japanese government. The loan balance of the Krungsri segment increased primarily due to the growth in the loan portfolio through the expansion of business scale following the acquisitions of consumer finance companies during the fiscal year ended March 31, 2024. As of September 30, 2024, loans, off-balance sheet credit instruments and due from banks held in relation to borrowers and counterparties that are subject to Russia country risk monitoring in accordance with our internal credit management policy amounted to approximately ¥0.16 trillion on a gross basis before taking into account any allowances.
Credit quality indicator
| | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) | | September 30, 2024 | | % Change |
| (in billions, except percentages)(1) |
| Commercial | ¥ | 103,897.9 | | | ¥ | 105,879.9 | | | 1.9 | % |
| Domestic | 57,385.8 | | | 62,041.3 | | | 8.1 | |
| Normal | 55,658.4 | | | 60,360.0 | | | 8.4 | |
| Close Watch | 1,507.8 | | | 1,446.1 | | | (4.1) | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 219.6 | | | 235.2 | | | 7.1 | |
| Foreign | 46,512.1 | | | 43,838.6 | | | (5.7) | |
| Normal | 45,254.2 | | | 42,622.7 | | | (5.8) | |
| Close Watch | 1,048.9 | | | 973.1 | | | (7.2) | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 209.0 | | | 242.8 | | | 16.2 | |
| Residential | ¥ | 12,497.4 | | | ¥ | 12,421.0 | | | (0.6) | % |
| Accrual | 12,456.9 | | | 12,383.3 | | | (0.6) | |
| Nonaccrual | 40.5 | | | 37.7 | | | (6.8) | |
| Card | ¥ | 484.9 | | | ¥ | 484.9 | | | 0.0 | % |
| Accrual | 412.3 | | | 410.3 | | | (0.5) | |
| Nonaccrual | 72.6 | | | 74.6 | | | 2.9 | |
| Krungsri | ¥ | 8,787.2 | | | ¥ | 9,004.4 | | | 2.5 | % |
| Performing | 7,815.9 | | | 7,837.1 | | | 0.3 | |
| Under-Performing | 712.8 | | | 853.7 | | | 19.8 | |
| Non-Performing | 258.5 | | | 313.6 | | | 21.3 | |
| Other | ¥ | 1,758.1 | | | ¥ | 1,992.1 | | | 13.3 | % |
| Accrual | 1,724.3 | | | 1,954.7 | | | 13.4 | |
| Nonaccrual | 33.8 | | | 37.4 | | | 10.8 | |
Note:
(1)Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
We classify loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, historical and current financial information, historical and current payment experience, credit documentation, public and non-public information about borrowers and current economic trends as deemed appropriate to each segment.
The primary credit quality indicator for loans within all classes of the Commercial segment is the internal credit rating assigned to each borrower based on our internal borrower ratings of 1 through 15 with the rating of 1 assigned to a borrower with the highest quality of credit. When assigning a credit rating to a borrower, we evaluate the borrower’s expected debt-service capability based on various information, including financial and operating information of the borrower as well as information on the industry in which the borrower operates, and the borrower’s business profile, management and compliance system. In evaluating a borrower’s debt-service capability, we also conduct an assessment of the level of earnings and an analysis of the borrower’s net worth. Based on the internal borrower rating, loans within the Commercial segment are categorized as Normal (internal borrower ratings of 1 through 9), Close Watch (internal borrower ratings of 10 through 12), and Likely to become Bankrupt or Legally/Virtually Bankrupt (internal borrower ratings of 13 through 15).
Loans to borrowers categorized as Normal represent those that are not deemed to have collectability issues. Loans to borrowers categorized as Close Watch represent those that require close monitoring as the borrower has begun to exhibit elements of potential concern with respect to its business performance and financial condition, the borrower has begun to exhibit elements of
serious concern with respect to its business performance and financial condition, including business problems requiring long-term solutions, or the borrower’s loans are loans contractually past due 90 days or more for special reasons. Loans to borrowers categorized as Likely to become Bankrupt or Legally/Virtually Bankrupt represent those that have a higher probability of default than those categorized as Close Watch due to serious debt repayment problems with poor progress in achieving restructuring plans, the borrower being considered virtually bankrupt with no prospects for an improvement in business operations, or the borrower being legally bankrupt with no prospects for continued business operations because of non-payment, suspension of business, voluntary liquidation or filing for legal liquidation.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
The accrual status is a primary credit quality indicator for loans within the Residential segment, the Card segment and the Other segment. The accrual status of these loans is determined based on the number of delinquent payments.
Loans within the Krungsri segment are categorized as Performing, Under-Performing or Non-Performing based on their delinquency status. Loans categorized as Under-Performing generally represent those that have significant increases in credit risk since origination, including, among other things, loans that are 30 days or more past due. Loans categorized as Non-Performing generally represent those that are 90 days or more past due.
For the Commercial, Residential, Card and Krungsri segments, credit quality indicators as of March 31, 2024 and September 30, 2024 are based on information as of March 31, 2024 and September 30, 2024 respectively. For the Other segment, credit quality indicators as of March 31, 2024 and September 30, 2024 are generally based on information as of December 31, 2023 and June 30, 2024, respectively.
Allowance for credit losses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2023 (As Adjusted): | Commercial | | Residential | | Card | | Krungsri | | Other | | Total |
| | (in billions) |
| Allowance for credit losses: | | | | | | | | | | | |
| Balance at beginning of period | ¥ | 719.6 | | | ¥ | 59.8 | | | ¥ | 42.4 | | | ¥ | 364.6 | | | ¥ | 93.1 | | | ¥ | 1,279.5 | |
| Provision for (reversal of) credit losses | (18.0) | | | 0.4 | | | 10.3 | | | 57.4 | | | 21.8 | | | 71.9 | |
| Charge-offs | 36.9 | | | 0.5 | | | 10.2 | | | 69.1 | | | 15.9 | | | 132.6 | |
| Recoveries collected | 9.7 | | | 0.0 | | | 0.4 | | | 15.9 | | | 8.5 | | | 34.5 | |
| Net charge-offs | 27.2 | | | 0.5 | | | 9.8 | | | 53.2 | | | 7.4 | | | 98.1 | |
Other(1)(2) | 1.6 | | | — | | | (7.7) | | | 38.2 | | | 11.1 | | | 43.2 | |
| Balance at end of period | ¥ | 676.0 | | | ¥ | 59.7 | | | ¥ | 35.2 | | | ¥ | 407.0 | | | ¥ | 118.6 | | | ¥ | 1,296.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2024: | Commercial | | Residential | | Card | | Krungsri | | Other | | Total |
| | (in billions) |
| Allowance for credit losses: | | | | | | | | | | | |
| Balance at beginning of period | ¥ | 745.5 | | | ¥ | 57.0 | | | ¥ | 36.4 | | | ¥ | 405.2 | | | ¥ | 112.9 | | | ¥ | 1,357.0 | |
| Provision for (reversal of) credit losses | 14.7 | | | (2.4) | | | 13.9 | | | 76.4 | | | 26.0 | | | 128.6 | |
| Charge-offs | 18.2 | | | 0.1 | | | 11.3 | | | 101.0 | | | 27.8 | | | 158.4 | |
| Recoveries collected | 5.8 | | | 0.0 | | | 0.5 | | | 18.4 | | | 7.0 | | | 31.7 | |
| Net charge-offs | 12.4 | | | 0.1 | | | 10.8 | | | 82.6 | | | 20.8 | | | 126.7 | |
Other(1) | (16.7) | | | — | | | — | | | 19.8 | | | 8.8 | | | 11.9 | |
| Balance at end of period | ¥ | 731.1 | | | ¥ | 54.5 | | | ¥ | 39.5 | | | ¥ | 418.8 | | | ¥ | 126.9 | | | ¥ | 1,370.8 | |
| | | | | | | | | | | |
Notes:
(1)Other is principally comprised of gains or losses from foreign exchange translation.
(2)For the six months ended September 30, 2023, Other includes the impact of the change in accounting principle relating to the recognition and measurement of troubled debt restructurings, which was adopted on April 1, 2023. The total impact across all segments was negative of ¥18.9 billion.
We recorded ¥128.6 billion of provision for credit losses for the six months ended September 30, 2024, compared to ¥71.9 billion of provision for credit losses for the same period of the previous fiscal year. Our total allowance for credit losses as of September 30, 2024 was ¥1,370.8 billion, an increase of ¥13.8 billion from ¥1,357.0 billion as of March 31, 2024. The total allowance for credit losses represented 1.05% of the total loan balance as of September 30, 2024, compared to 1.06% as of March 31, 2024.
Between March 31, 2024 and September 30, 2024, the total balance of allowance for credit losses increased mainly due to provision for credit losses in the Krungsri segment. Significant trends in our portfolio segments are discussed below.
Commercial segment—We recorded ¥14.7 billion of provision for credit losses for the six months ended September 30, 2024, compared to ¥18.0 billion of reversal of credit losses for the same period of the previous fiscal year. The provision for credit losses for the current six-month period primarily related to a large borrower in the foreign infrastructure industry. On the other hand, our qualitative reserve recorded in light of the current outlook on the Russia-Ukraine situation decreased to ¥40.7 billion as of September 30, 2024 from ¥61.8 billion as of March 31, 2024. The ratio of loans classified as Close Watch to total loans in this segment decreased to 2.28% as of September 30, 2024 from 2.46% as of March 31, 2024. The ratio of loans classified as Likely to become Bankrupt or Legally/Virtually Bankrupt to total loans in the segment increased to 0.45% as of September 30, 2024 from 0.41% as of March 31, 2024. The ratio of allowance for credit losses to the total loan balance in this segment decreased to 0.69% as of September 30, 2024 from 0.72% as of March 31, 2024.
Krungsri segment—We recorded ¥76.4 billion of provision for credit losses for the six months ended September 30, 2024, compared to ¥57.4 billion of provision for credit losses for the same period of the previous fiscal year. The provision for credit losses in this segment for the current six-month period mainly related to an increase during the current six-month period in non-performing loans at consumer finance companies acquired in the fiscal year ended March 31, 2024. The ratio of loans classified as Under-Performing or below to total loans in the segment increased to 12.96% as of September 30, 2024 from 11.05% as of March 31, 2024. The ratio of allowance for credit losses to the total loan balance in this segment increased to 4.65% as of September 30, 2024 from 4.61% as of March 31, 2024.
When there is an improvement in asset quality, reversal of credit losses is recorded in our consolidated statements of operations to maintain the allowance for credit losses at a level management deems appropriate. Although we reversed allowance for credit losses for certain loan portfolio segments in recent periods, we have historically provided for credit losses, and in future periods we may need to recognize a provision for credit losses. See “Item 3.D. Key Information—Risk Factors—Credit Risk—We may suffer additional credit-related losses in the future if our borrowers are unable to repay their loans as expected or if the measures we take in reaction to, or in anticipation of, our borrowers’ deteriorating repayment abilities prove inappropriate or insufficient.” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
Allowance policy
We apply the current expected credit loss model that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information under Accounting Standards Codification 326, Financial Instruments - Credit Losses,
to estimate credit losses. For more information on this guidance, see Note 1 to our audited consolidated financial statements included in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
We maintain an allowance for credit losses to absorb expected losses on the loan portfolio. We have divided our allowance for credit losses into five portfolio segments—Commercial, Residential, Card, Krungsri and Other.
For all portfolio segments, key elements relating to the policies and discipline used in determining the allowance for credit losses are our credit classification and related borrower categorization process, which are closely linked to the risk grading standards set by the Japanese regulatory authorities for asset evaluation and assessment, and are used as a basis for establishing the allowance for credit losses and charge-offs. The categorization is based on conditions that may affect the ability of borrowers to service their debt, such as current financial condition, results of operations and cash flows, historical payment experience, credit documentation, other public information and current trends.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
For the Commercial and Krungsri segments, our allowance for credit losses represents an estimate of the credit losses that are expected over the life of the financial instrument or exposure and is recognized by incorporating relevant available information relating to past events, current conditions, and reasonable and supportable forecasts. The allowance for credit losses primarily consists of (1) an allowance for loans measured on a collective basis, when similar risk characteristics exist, and (2) an allowance for loans measured on an individual basis, for loans that do not share similar risk characteristics. Expected losses are calculated using quantitative models that incorporate historical loss information and economic forecast scenarios and qualitative adjustments are also implemented to account for the risks that are not adequately captured in the quantitative model or economic forecasting assumptions. For the Residential and Card segments, the loans are smaller-balance homogeneous loans that are pooled by the risk ratings based on the number of delinquencies.
For more information on our methodologies used to estimate the allowance for each portfolio segment, see “Item 5.E. Operating and Financial Review and Prospects—Critical Accounting Estimates” and “Summary of Significant Accounting Policies” in Note 1 to our consolidated financial statements included in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
We maintain an allowance for credit losses on off-balance sheet credit instruments, including commitments to extend credit, guarantees, standby letters of credit and other financial instruments. The allowance is included in other liabilities. We have adopted for such instruments the same methodology as that which is used in determining the allowance for credit losses on loans.
Nonaccrual loans
We consider a loan to be a nonaccrual loan when substantial doubt exists as to the full and timely payment of interest on, or repayment of, the principal of the loan, which is a borrower condition that generally corresponds to borrowers in categories 13 and below in our internal rating system (which corresponds to “Likely to become Bankrupt,” “Virtually Bankrupt” and “Bankrupt or de facto Bankrupt” status under Japanese banking regulations). Loans are also placed in nonaccrual status when principal or interest is contractually past due one month or more with respect to loans within the Commercial segment, three months or more with respect to loans within the Card, and Krungsri segments, and six months or more with respect to loans within the Residential segment.
For more information on our credit and borrower ratings, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Credit Risk Management” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
| | | | | | | | | | | | | | | | | |
| March 31,
2024
(As Adjusted) | | September 30,
2024 | | % Change |
| (in billions, except percentages) |
| Commercial | ¥ | 520.6 | | | ¥ | 563.4 | | | 8.2 | % |
| Domestic | 295.0 | | | 305.3 | | | 3.5 | |
| Foreign | 225.6 | | | 258.1 | | | 14.4 | |
| Residential | 41.1 | | | 38.3 | | | (6.9) | |
| Card | 72.6 | | | 74.6 | | | 2.9 | |
| Krungsri | 258.5 | | | 313.6 | | | 21.3 | |
| Other | 33.8 | | | 37.4 | | | 10.8 | |
Total(1) | ¥ | 926.6 | | | ¥ | 1,027.3 | | | 10.9 | % |
Note:
(1)The above table does not include loans held for sale of ¥396.3 billion and ¥326.8 billion as of March 31, 2024 and September 30, 2024, respectively.
Total nonaccrual loans increased ¥100.7 billion between March 31, 2024 and September 30, 2024, primarily due to an increase in the balance of nonaccrual loans in the Foreign Commercial segment and the Krungsri segment. The increase in nonaccrual loans in the Foreign Commercial segment mainly related to the loans to a large borrower in the foreign infrastructure industry. The increase in nonaccrual loans in the Krungsri segment was mainly due to an increase during the current six-month period in non-performing loans at consumer finance companies acquired in the fiscal year ended March 31, 2024.
Investment Portfolio
Our total investment securities decreased 12.1% to ¥54,827.5 billion as of September 30, 2024, compared to March 31, 2024. Our investment securities primarily consist of Japanese government bonds and marketable equity securities. Japanese government bonds are classified as available-for-sale debt securities or held-to-maturity debt securities. Our investment in Japanese government bonds is a part of our asset and liability management policy with respect to investing the amount of Japanese yen-denominated funds exceeding our net loans. The percentage of our holding of available-for-sale Japanese government bonds to the total investment securities was 34.0% as of September 30, 2024, compared to 37.1% as of March 31, 2024. The balance of such bonds decreased as we sold a portion of our available-for-sale Japanese government bond portfolio with unrealized losses. We also sold a portion of our Japanese prefectural and municipal bond portfolio with unrealized losses. Our holding of Japanese government bonds that are classified as held-to-maturity debt securities also decreased between March 31, 2024 and September 30, 2024. Such bonds accounted for 25.2% of the total investment securities as of September 30, 2024, compared to 24.3% as of March 31, 2024, as the total balance of investment securities decreased.
Historically, we have held equity securities of some of our customers primarily for strategic purposes, in particular to maintain long-term relationships with these customers. We continue to focus on reducing our investment in equity securities for such purposes in order to reduce the price fluctuation risk in our equity portfolio from a risk management perspective and to respond to applicable regulatory requirements as well as increasing market expectations for us to reduce our equity portfolio. As of March 31, 2024 and September 30, 2024, the aggregate book value of our marketable equity securities under Japanese GAAP satisfied the requirements of the legislation prohibiting banks from holding equity securities in excess of their Tier 1 capital. In November 2024, we announced that we increased our target to reduce the balance of equity securities held for strategic purposes valued on an acquisition cost basis under Japanese GAAP to ¥700.0 billion within the three years ending March 31, 2027. During the six months ended September 30, 2024, we sold down an aggregate of approximately ¥170.0 billion of equity securities held in our strategic equity investment portfolio on the same acquisition cost basis. Various factors, including changes in market conditions, may affect the amount of equity securities we should sell and our ability to achieve the target as planned.
Debt Securities
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) | | September 30, 2024 | | % Change |
| Amortized
cost | | Fair value | | Net
unrealized
gains (losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains (losses) | | Amortized
cost | | Fair value | | Net
unrealized
gains (losses) |
| (in billions, except percentages) |
| Available-for-sale debt securities: | | | | | | | | | | | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 23,287.7 | | | ¥ | 23,167.4 | | | ¥ | (120.3) | | | ¥ | 18,761.3 | | | ¥ | 18,640.2 | | | ¥ | (121.1) | | | (19.4) | % | | (19.5) | % | | (0.6) | % |
| Japanese prefectural and municipal bonds | 1,055.6 | | | 1,046.0 | | | (9.6) | | | 871.8 | | | 860.6 | | | (11.2) | | | (17.4) | | | (17.7) | | | (16.8) | |
| Foreign government and official institution bonds | 3,428.2 | | | 3,302.5 | | | (125.7) | | | 3,487.2 | | | 3,430.0 | | | (57.2) | | | 1.7 | | | 3.9 | | | 54.4 | |
| Corporate bonds | 1,019.8 | | | 1,026.5 | | | 6.7 | | | 937.7 | | | 942.0 | | | 4.3 | | | (8.1) | | | (8.2) | | | (34.9) | |
| Mortgage-backed securities | 1,229.6 | | | 1,229.5 | | | (0.1) | | | 1,173.9 | | | 1,173.8 | | | (0.1) | | | (4.5) | | | (4.5) | | | 46.7 | |
| Asset-backed securities | 1,239.8 | | | 1,247.1 | | | 7.3 | | | 1,402.4 | | | 1,412.7 | | | 10.3 | | | 13.1 | | | 13.3 | | | 38.6 | |
| | | | | | | | | | | | | | | | | |
| Other debt securities | 407.9 | | | 403.9 | | | (4.0) | | | 501.6 | | | 503.5 | | | 1.9 | | | 23.0 | | | 24.7 | | | 147.1 | |
| Total available-for-sale debt securities | ¥ | 31,668.6 | | | ¥ | 31,422.9 | | | ¥ | (245.7) | | | ¥ | 27,135.9 | | | ¥ | 26,962.8 | | | ¥ | (173.1) | | | (14.3) | % | | (14.2) | % | | 29.5 | % |
Held-to-maturity debt securities(1) | ¥ | 24,844.0 | | | ¥ | 24,557.5 | | | ¥ | (286.5) | | | ¥ | 22,739.4 | | | ¥ | 22,548.6 | | | ¥ | (190.8) | | | (8.5) | % | | (8.2) | % | | 33.4 | % |
Note:
(1)See Note 3 to our unaudited condensed consolidated financial statements for more details.
Net unrealized losses on available-for-sale debt securities decreased due to an improvement in net unrealized losses on foreign government and official institution bonds, partially offset by an increase in net unrealized losses on Japanese national government and Japanese government agency bonds due to the increase in Japanese interest rates as of September 30, 2024 compared to March 31, 2024.
The total amortized cost of available-for-sale debt securities decreased 14.3% reflecting decreases in our holdings of Japanese national government and Japanese government agency bonds and Japanese prefectural and municipal bonds. The amortized cost of Japanese national government and Japanese government agency bonds decreased 19.4% and the amortized cost of Japanese prefectural and municipal bonds decreased 17.4% mainly because of redemption of such bonds held by our banking subsidiaries.
The amortized cost of held-to-maturity debt securities decreased 8.5% between March 31, 2024 and September 30, 2024, primarily due to decreases in our holdings of Japanese national government and Japanese government agency bonds by 8.9% to ¥13,842.7 billion and our holdings of residential mortgage-backed securities by 5.7% to ¥4,670.8 billion. Net unrealized losses on held-to-maturity debt securities improved 33.4% to ¥190.8 billion. Net unrealized losses on Japanese national government and Japanese government agency bonds increased 28.4% to ¥119.3 billion. On the other hand, net unrealized losses on residential mortgage-backed securities decreased 70.3% to ¥52.4 billion.
Equity Securities
| | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) | | September 30,
2024 | | % Change |
| (in billions, except percentages) |
| Equity securities: | | | | | |
| Marketable equity securities | ¥ | 5,470.8 | | | ¥ | 4,369.2 | | | (20.1) | % |
Nonmarketable equity securities(1) | 661.6 | | | 756.1 | | | 14.3 | |
| Total | ¥ | 6,132.4 | | | ¥ | 5,125.3 | | | (16.4) | % |
Note:
(1)These securities are equity securities, including unlisted common stocks and preferred shares, issued by both listed companies and unlisted companies, and carried at cost, except for those held by certain subsidiaries subject to specialized industry accounting principles for investment companies and brokers and dealers, and measured at fair value, which are ¥87.8 billion and ¥91.9 billion at March 31, 2024 and September 30, 2024, respectively.
Equity securities decreased 16.4% mainly because marketable equity securities decreased due to the decline in Japanese stock prices at the end of September 2024 compared to the end of March 2024 and sales of such securities during the current six-month period. Marketable equity securities largely consist of listed equity securities in Japan.
Cash and Due from Banks, and Interest-earning Deposits in Other Banks
Cash and due from banks decreased ¥360.8 billion to ¥4,055.8 billion as of September 30, 2024 from ¥4,416.6 billion as of March 31, 2024. Interest-earning deposits in other banks decreased ¥1,618.2 billion to ¥104,083.8 billion as of September 30, 2024 from ¥105,702.0 billion as of March 31, 2024. This decrease was mainly because of a decrease in deposits of foreign branches.
Receivables under Resale Agreements
Receivables under resale agreements decreased ¥409.7 billion to ¥18,414.2 billion as of September 30, 2024 from ¥18,823.9 billion as of March 31, 2024. This decrease was mainly because of a decrease in short-term funding transactions as part of our asset and liability management.
Receivables under securities borrowing transactions
Receivables under securities borrowing transactions increased ¥534.3 billion to ¥5,535.1 billion as of September 30, 2024 from ¥5,000.8 billion as of March 31, 2024. This increase was mainly because of an increase in collateral for bond lending and borrowing transactions.
Trading Account Assets
Trading account assets increased ¥4,379.1 billion to ¥54,148.5 billion as of September 30, 2024 from ¥49,769.4 billion as of March 31, 2024. Trading account assets mainly consist of trading account securities and trading derivative assets. Trading account securities increased ¥3,362.0 billion to ¥37,758.6 billion as of September 30, 2024 from ¥34,396.6 billion as of March 31, 2024 mainly due to increases in residential mortgage-backed securities and foreign government and official institution bonds. Trading derivative assets increased ¥1,009.9 billion to ¥16,351.1 billion as of September 30, 2024 from ¥15,341.2 billion as of March 31, 2024 mainly due to an increase in interest rate derivative assets.
Total Liabilities
As of September 30, 2024, total liabilities were ¥373,456.7 billion, a decrease of ¥5,909.7 billion from ¥379,366.4 billion as of March 31, 2024. This was primarily due to a decrease of ¥15,458.6 billion in long-term debt and a decrease of ¥2,245.0 billion in deposits. These decreases were partially offset by an increase of ¥11,777.79 billion in due to trust account and other short-term borrowings.
Deposits
Deposits are our primary source of funds. The balance of deposits decreased ¥2,245.0 billion to ¥244,891.0 billion as of September 30, 2024 from ¥247,136.0 billion as of March 31, 2024. The decrease was mainly attributable to a decrease in deposits in overseas offices, principally interest-bearing deposits, primarily reflecting the foreign exchange translation impact of the appreciation of the Japanese yen against other major currencies.
The total average balance of interest-bearing deposits increased ¥8,105.8 billion to ¥209,873.5 billion for the six months ended September 30, 2024 from ¥201,767.7 billion for the same period of the previous fiscal year mainly due to the impact of the rise in domestic and overseas policy interest rates.
Payables under Repurchase Agreements
Payables under repurchase agreements increased ¥2,033.4 billion to ¥37,723.9 billion as of September 30, 2024 from ¥35,690.5 billion as of March 31, 2024. This increase was mainly because of an increase in our short-term funding needs.
Other Short-Term Borrowings
Other short-term borrowings increased ¥12,454.8 billion to ¥23,596.7 billion as of September 30, 2024 from ¥11,141.9 billion as of March 31, 2024. This increase was mainly due to increases in new borrowings from the Bank of Japan and foreign commercial paper borrowings.
Trading Account Liabilities
Trading account liabilities increased ¥269.8 billion to ¥16,849.3 billion as of September 30, 2024 from ¥16,579.5 billion as of March 31, 2024. This increase was mainly due to an increase in interest rate contracts. This increase was partially offset by a decrease in foreign exchange contracts.
Long-term Debt
Long-term debt decreased ¥15,458.6 billion to ¥24,554.2 billion as of September 30, 2024 from ¥40,012.8 billion as of March 31, 2024. This decrease was primarily due to a decrease in borrowings from the Bank of Japan as a result of maturity repayment.
The average balance of long-term debt for the six months ended September 30, 2024 was ¥35,794.5 billion, a decrease of ¥2,912.5 billion from ¥38,707.0 billion for the same period of the previous fiscal year.
Sources of Funding and Liquidity
Our primary source of liquidity is from a large balance of deposits, mainly ordinary deposits, certificates of deposit and time deposits. Time deposits have historically shown a high rollover rate among our corporate customers and individual depositors. The average deposit balance increased to ¥248,894.6 billion for the current six-month period from ¥240,141.2 billion for the same period of the prior fiscal year. These deposits provide us with a sizable source of stable and low-cost funds. Our average deposits, combined with our average total equity of ¥20,017.9 billion, funded 65.0% of our average total assets of ¥413,502.6 billion during the current six-month period. Our deposits exceeded our loans before allowance for credit losses by ¥114,645.6 billion as of September 30, 2024 compared to ¥119,225.7 billion as of March 31, 2024. As part of our asset and liability management policy, a significant portion of the amount of Japanese yen-denominated funds exceeding our loans has been deposited with the Bank of Japan or invested in Japanese government bonds in recent periods.
The remaining funding was primarily provided by short-term borrowings and long-term senior and subordinated debt. Short-term borrowings consist of call money, funds purchased, payables under repurchase agreements, payables under securities lending transactions, due to trust account, and other short-term borrowings. From time to time, we have issued long-term instruments, including various fixed and floating interest rate senior and subordinated bonds with and without maturities. The average balance of short-term borrowings for the current six-month period was ¥53,985.2 billion. The average balance of long-term debt for the current six-month period was ¥35,794.5 billion. Liquidity may also be provided by the sale of financial assets, including available-for-sale debt securities, marketable equity securities, trading account securities and loans. Additional liquidity may be provided by the maturity of loans.
Our liquidity may be impaired by factors such as an inability to raise funding in financial markets, an increase in our funding costs, unexpected increases in cash or collateral requirements, an inability to sell assets or enter into or settle other transactions as planned or needed, and an inability to attract or retain deposits. See “Item 3.D. Key Information—Risk Factors—Funding Liquidity Risk—Deterioration in market liquidity or other external circumstances or an actual or perceived decline in our creditworthiness could negatively affect our ability to access and maintain liquidity” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
We manage our group-wide liquidity on a consolidated basis based on the tests and analyses conducted at the subsidiary level. Our major banking subsidiaries, MUFG Bank and Mitsubishi UFJ Trust and Banking, set liquidity and funding limits designed to maintain their respective requirements for funding from market sources below pre-determined levels for certain periods (e.g., one-day, two-week and one-month). They also monitor the balance of buffer assets they respectively hold, including Japanese government bonds and U.S. Treasury bonds, which can be used for cash funding even in periods of stress. In addition, they regularly perform liquidity stress testing designed to evaluate the impact of systemic market stress conditions and institution-specific stress events, including credit rating downgrades, on their liquidity positions.
We collect and evaluate the results of the stress tests individually performed by our major subsidiaries to ensure our ability to meet our liquidity requirements on a consolidated basis in stress scenarios.
We manage our funding sources by setting limits on, or targets for, our holdings of buffer assets, primarily Japanese government bonds. We also regard deposits with the Bank of Japan as buffer assets. In addition, our commercial banking subsidiaries manage their funding sources through liquidity-supplying products such as commitment lines and through a liquidity gap, or the excess of cash inflows over cash outflows.
For information on our commitments, guarantees and other off-balance sheet credit instruments, please see Note 13 to our unaudited condensed consolidated financial statements.
Liquidity Requirements for Banking Institutions in Japan
We are required to calculate and disclose our LCR calculated in accordance with the methodology prescribed in the FSA guidance that has been adopted to implement the relevant Basel III standard. Starting in calendar year 2019, we are required to maintain a minimum LCR of 100%. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Liquidity Coverage Ratio” in our annual report on Form 20-F for the fiscal year ended March 31, 2024 and “Capital Adequacy—Liquidity Coverage Ratios of MUFG and Major Banking Subsidiaries in Japan” below.
Stable Funding Requirements for Banking Institutions in Japan
We are required to calculate and disclose our NSFR calculated in accordance with the methodology prescribed in the FSA guidance that has been adopted to implement the relevant Basel III standard. Starting in September 2021, we are required to maintain a minimum NSFR of 100%. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Net Stable Funding Ratio” in our annual report on Form 20-F for the fiscal year ended March 31, 2024 and “Capital Adequacy—Net Stable Funding Ratios of MUFG and Major Banking Subsidiaries in Japan” below.
Total Equity
The following table presents a summary of our total equity as of March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | |
| | March 31, 2024 (As Adjusted) | | September 30, 2024 | | % Change |
| | (in billions, except percentages) |
| Capital stock | ¥ | 2,090.3 | | | ¥ | 2,090.3 | | | — | % |
| Capital surplus | 4,635.9 | | | 4,617.1 | | | (0.4) | |
| Retained earnings | 9,326.0 | | | 10,144.8 | | | 8.8 | |
| Retained earnings appropriated for legal reserve | 239.6 | | | 239.6 | | | — | |
| Unappropriated retained earnings | 9,086.4 | | | 9,905.2 | | | 9.0 | |
| Accumulated other comprehensive income, net of taxes | 2,237.6 | | | 2,480.9 | | | 10.9 | |
| Treasury stock, at cost | (614.1) | | | (723.2) | | | (17.8) | |
| Total Mitsubishi UFJ Financial Group shareholders’ equity | ¥ | 17,675.7 | | | ¥ | 18,609.9 | | | 5.3 | % |
| Noncontrolling interests | 841.4 | | | 871.2 | | | 3.5 | |
| Total equity | ¥ | 18,517.1 | | | ¥ | 19,481.1 | | | 5.2 | % |
| Ratio of total equity to total assets | 4.65 | % | | 4.96 | % | | |
Capital Adequacy
We are subject to various regulatory capital requirements promulgated by the regulatory authorities of the countries in which we operate. Failure to meet minimum capital requirements can result in mandatory actions being taken by regulators that could have a direct material effect on our consolidated financial statements.
Moreover, if our capital ratios are perceived to be low, our counterparties may avoid entering into transactions with us, which in turn could negatively affect our business and operations. For further information, see “Item 3.D. Key Information—Risk Factors—Risks Related to Our Ability to Meet Regulatory Capital Requirements—We may not be able to maintain our capital ratios and other regulatory ratios above minimum required levels, which could result in various regulatory actions, including the suspension of some or all of our operations.” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
We continually monitor our risk-adjusted capital ratios, leverage ratio and TLAC ratios closely, and manage our operations in consideration of the capital requirements. Factors that affect some or all of these ratios include fluctuations in the value of our assets, including our credit risk assets such as loans and equity securities, the risk weights of which depend on the borrowers’ or issuers’ internal ratings, and marketable securities, and fluctuations in the value of the Japanese yen against the U.S. dollar and other foreign currencies, as well as general price levels of Japanese equity securities.
Capital Requirements for Banking Institutions in Japan
Under Japanese regulatory capital requirements, our consolidated capital components, including Common Equity Tier 1, Tier 1, and Tier 2 capital and risk-weighted assets, are calculated based on our consolidated financial statements prepared under Japanese GAAP. Each of the consolidated and stand-alone capital components and risk-weighted assets of our banking subsidiaries in Japan is also calculated based on consolidated and non-consolidated financial statements prepared under Japanese GAAP.
As of September 30, 2024, we were required to maintain a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.15% in addition to the 4.5% minimum Common Equity Tier 1 capital ratio. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Capital adequacy” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
For information on the issuances of Additional Tier 1 and Tier 2 securities, see also “Recent Developments—Issuances of Basel III-Compliant Subordinated Debt.”
Leverage Requirements for Banking Institutions in Japan
Our consolidated leverage ratio is calculated in accordance with the methodology prescribed in the FSA guidance that has been adopted to implement the relevant Basel III standard. The leverage ratio is designed for monitoring and preventing the build-up of excessive leverage in the banking sector and is expressed as the ratio of Tier 1 capital to total balance sheet assets adjusted in accordance with the FSA guidance. As of March 31, 2024, we were required to maintain a minimum leverage ratio of 3.75% consisting of the minimum requirement at 3.00% plus a leverage ratio buffer equal to 50% of the G-SIB surcharge. The minimum leverage ratio on or after April 1, 2024 has been raised to the minimum requirement at 3.15% plus a G-SIB leverage ratio buffer set at 50% of a G-SIB surcharge plus 0.05% while deposits with the Bank of Japan remain excluded from the leverage ratio calculation. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Leverage ratio” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
TLAC Requirements for Banking Institutions in Japan
Our External TLAC ratios are calculated in accordance with the methodology prescribed in the FSA guidance that has been adopted to implement the TLAC Principle published by the FSB in November 2015. External TLAC ratios are expressed as the ratio of External TLAC amount to risk-weighted assets or total exposure in accordance with the FSA guidance. As of March 31, 2024, we were required to maintain External TLAC ratios of 18% on a risk-weighted assets basis and 6.75% on a total exposure basis. The minimum External TLAC ratio on a total exposure basis on or after April 1, 2024 has been raised to 7.10% in line with the increase in the minimum leverage ratio. See “Item 4.B. Information on the Company—Business Overview—Supervision and Regulation—Japan—Total loss-absorbing capacity” in our annual report on Form 20-F for the fiscal year ended March 31, 2024. For information on the issuances of TLAC-qualified securities, see also “Recent Developments—Issuances of TLAC Eligible Senior Debt.”
Capital Ratios, Leverage Ratio and External TLAC Ratios of MUFG
The figures underlying the amounts and ratios in the table below are calculated in accordance with Japanese banking regulations based on information derived from our consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The amounts and ratios below are rounded down.
Starting from the fiscal year ending March 31, 2025, the fiscal year of Krungsri has been changed from the previous January to December period to an April to March period for consolidation purposes. In connection with this change, the figures in the table below, prepared in accordance with Japanese GAAP for the six-month period ended September 30, 2024, reflect Krungsri's relevant amounts for the nine months ended September 30, 2024.
| | | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | Minimum ratios required(1) | | As of September 30, 2024 | | Minimum ratios required(1) |
| | (in billions, except percentages) |
| Capital components: | | | | | | | |
| Common Equity Tier 1 | ¥ | 15,041.3 | | | | | ¥ | 15,635.9 | | | |
| Additional Tier 1 | 2,438.4 | | | | | 2,604.7 | | | |
| Tier 1 capital | 17,479.7 | | | | | 18,240.7 | | | |
| Tier 2 capital | 2,338.1 | | | | | 2,402.8 | | | |
| Total capital | ¥ | 19,817.8 | | | | | ¥ | 20,643.5 | | | |
| Risk-weighted assets | ¥ | 111,160.1 | | | | | ¥ | 108,956.8 | | | |
| Capital ratios: | | | | | | | |
| Common Equity Tier 1 capital | 13.53 | % | | 8.66 | % | | 14.35 | % | | 8.65 | % |
| Tier 1 capital | 15.72 | | | 10.16 | | | 16.74 | | | 10.15 | |
| Total capital | 17.82 | | | 12.16 | | | 18.94 | | | 12.15 | |
Leverage ratio(2) | 5.19 | | | 3.75 | | | 5.59 | | | 3.95 | |
| External TLAC ratios | | | | | | | |
Risk-weighted assets basis(3) | 25.06 | | | 18.00 | | | 24.80 | | | 18.00 | |
Total exposure basis(2) | 9.65 | | | 6.75 | | | 9.67 | | | 7.10 | |
Notes:
(1)The minimum capital ratios required as of March 31, 2024 include a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.16%. The minimum capital ratios required as of September 30, 2024 include a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.15%.
(2)Deposits with the Bank of Japan are excluded from the total exposure based on notification issued by the FSA.
(3)The TLAC ratio on a risk-weighted assets basis and the required minimum ratio as of March 31, 2024 do not include the regulatory capital buffers consisting of a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.16%. The TLAC ratio on a risk-weighted assets basis and the required minimum ratio as of September 30, 2024 do not include the regulatory capital buffers consisting of a capital conservation buffer of 2.5%, a G-SIB surcharge of 1.5% and a countercyclical buffer of 0.15%.
Management believes that, as of September 30, 2024, we were in compliance with all capital adequacy requirements to which we were subject.
Our Common Equity Tier 1 capital ratio as of September 30, 2024 was higher compared to the ratio as of March 31, 2024 primarily due to an increase in net profits and a decrease in risk-weighted assets. The decrease in risk-weighted assets mainly reflected a reduction in equity holdings included in credit risk assets.
Capital Ratios and Leverage Ratios of Major Banking Subsidiaries in Japan
The figures underlying the ratios in the table below are calculated in accordance with Japanese banking regulations based on information derived from each bank’s consolidated and non-consolidated financial statements prepared in accordance with Japanese GAAP, as required by the FSA. The ratios below are rounded down.
Starting from the fiscal year ending March 31, 2025, the fiscal year of Krungsri has been changed from the previous January to December period to an April to March period for consolidation purposes. In connection with this change, the figures in the table below, prepared in accordance with Japanese GAAP for the six-month period ended September 30, 2024, reflect Krungsri's relevant amounts for the nine months ended September 30, 2024.
| | | | | | | | | | | | | | | | | |
| As of March 31, 2024 | | As of September 30, 2024 | | Minimum
ratios required |
| Consolidated: | | | | | |
| MUFG Bank | | | | | |
| Common Equity Tier 1 capital ratio | 13.80 | % | | 15.15 | % | | 4.50 | % |
| Tier 1 capital ratio | 16.11 | | | 17.68 | | | 6.00 | |
| Total capital ratio | 18.11 | | | 19.69 | | | 8.00 | |
Leverage ratio(1) | 5.23 | | | 5.78 | | | 3.15 | |
| Mitsubishi UFJ Trust and Banking | | | | | |
| Common Equity Tier 1 capital ratio | 15.56 | | | 14.84 | | | 4.50 | |
| Tier 1 capital ratio | 17.83 | | | 17.68 | | | 6.00 | |
| Total capital ratio | 20.42 | | | 21.02 | | | 8.00 | |
Leverage ratio(1) | 6.34 | | | 6.39 | | | 3.15 | |
| Stand-alone: | | | | | |
| MUFG Bank | | | | | |
| Common Equity Tier 1 capital ratio | 11.77 | | | 12.52 | | | 4.50 | |
| Tier 1 capital ratio | 14.38 | | | 15.42 | | | 6.00 | |
| Total capital ratio | 16.29 | | | 17.33 | | | 8.00 | |
Leverage ratio(1) | 4.50 | | | 4.81 | | | 3.15 | |
| Mitsubishi UFJ Trust and Banking | | | | | |
| Common Equity Tier 1 capital ratio | 14.71 | | | 16.09 | | | 4.50 | |
| Tier 1 capital ratio | 16.72 | | | 18.66 | | | 6.00 | |
| Total capital ratio | 19.03 | | | 21.68 | | | 8.00 | |
Leverage ratio(1) | 7.09 | | | 7.89 | | | 3.15 | |
Note:
(1)Deposits with the Bank of Japan are excluded from the leverage exposure based on notification issued by the FSA.
Management believes that, as of September 30, 2024, our banking subsidiaries were in compliance with all capital adequacy requirements to which they were subject.
Liquidity Coverage Ratios of MUFG and Major Banking Subsidiaries in Japan
The LCRs in the table below are calculated in accordance with Basel III as adopted by the FSA for the periods indicated. The figures underlying the ratios are calculated in accordance with Japanese banking regulations. The percentages below are rounded down.
| | | | | | | | | | | | | | | | | |
| | Three months ended |
| | March 31, 2024(1)(4) | | June 30, 2024(2)(4) | | September 30, 2024(3)(4) |
| MUFG (consolidated) | 161.7 | % | | 161.6 | % | | 163.0 | % |
| MUFG Bank (consolidated) | 173.0 | | | 173.3 | | | 174.4 | |
| MUFG Bank (stand-alone) | 177.7 | | | 178.1 | | | 180.7 | |
| Mitsubishi UFJ Trust and Banking (consolidated) | 122.2 | | | 119.1 | | | 122.1 | |
| Mitsubishi UFJ Trust and Banking (stand-alone) | 148.8 | | | 139.4 | | | 143.2 | |
Notes:
(1)Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between January 4, 2024 and March 29, 2024 divided by the average amount of net cash outflows for the same fifty-eight business days.
(2)Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between April 1, 2024 and June 28, 2024 divided by the average amount of net cash outflows for the same sixty-two business days.
(3)Each of the ratios is calculated as the average balance of High-Quality Liquid Assets on the business days between July 1, 2024 and September 30, 2024 divided by the average amount of net cash outflows for the same sixty-two business days.
(4)The LCR is to be calculated as an average based on daily values in accordance with the Japanese banking regulations.
See “Sources of Funding and Liquidity.”
Net Stable Funding Ratios of MUFG and Major Banking Subsidiaries in Japan
The NSFRs in the table below are calculated in accordance with Basel III as adopted by the FSA as of the date indicated. The figures underlying the ratios are calculated in accordance with Japanese banking regulations. The percentages below are rounded down.
| | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | As of June 30, 2024 | | As of September 30, 2024 |
| MUFG (consolidated) | 114.8 | % | | 113.7 | % | | 119.2 | % |
| MUFG Bank (consolidated) | 126.1 | | | 124.1 | | | 129.5 | |
| MUFG Bank (stand-alone) | 127.7 | | | 126.1 | | | 131.9 | |
| Mitsubishi UFJ Trust and Banking (consolidated) | 121.1 | | | 120.8 | | | 129.1 | |
| Mitsubishi UFJ Trust and Banking (stand-alone) | 121.9 | | | 120.8 | | | 131.9 | |
See “Sources of Funding and Liquidity.”
Capital Requirements for Securities Firms in Japan and Overseas
We have securities subsidiaries in Japan and overseas, which are also subject to regulatory capital requirements. In Japan, the Financial Instruments and Exchange Act of Japan and related ordinances require financial instruments firms to maintain a minimum capital ratio of 120% calculated as a percentage of capital accounts less certain fixed assets, as determined in accordance with Japanese GAAP, against amounts equivalent to market, counterparty credit and operational risks. Specific guidelines are issued as a ministerial ordinance which details the definitions of essential components of the capital ratios, including capital, deductible fixed asset items and risks, and related measures. Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. A capital ratio of less than 140% will call for additional regulatory reporting, a capital ratio of less than 120% may result in an order to change the method of business, and a capital ratio of less than 100% may lead to a suspension of all or part of the business for a period of time and cancellation of a registration. Overseas securities subsidiaries are subject to the relevant regulatory capital requirements of the countries or jurisdictions in which they operate.
Capital Ratio of Mitsubishi UFJ Morgan Stanley Securities
As of September 30, 2024, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥549.7 billion represented 322.1% of the total amounts equivalent to market, counterparty credit and operational risks. As of March 31, 2024, Mitsubishi UFJ Morgan Stanley Securities’ capital accounts less certain fixed assets of ¥537.3 billion represented 305.2% of the total amounts equivalent to market, counterparty credit and operational risks. These figures are calculated in accordance with Japanese GAAP, pursuant to the Financial Instruments and Exchange Act of Japan.
For further information, see Note 21 to our audited consolidated financial statements included in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. Certain accounting policies require management to make difficult, complex or subjective judgments regarding the valuation of assets and liabilities. The accounting policies are fundamental to understanding our operating and financial review and prospects. Critical accounting estimates include our allowance for credit losses, goodwill, and valuation of financial instruments. For a further discussion of our critical accounting estimates, see our annual report on Form 20-F for the fiscal year ended March 31, 2024.
Market Risk
To measure market risks for trading and non-trading activities, we use the VaR method which estimates changes in the market value of portfolios within a certain period by statistically analyzing past market data. The principal model used for these activities is a historical simulation, or HS, model. The HS model calculates VaR amounts by estimating the profit and loss on the current portfolio by applying actual fluctuations in market rates and prices over a fixed period in the past.
VaR for Trading Activities. The VaR for our total trading activities in the six months ended September 30, 2024 measured using an HS-VaR model (holding period, one business day; confidence interval, 95%; and observation period, 250 business days) is presented in the table below. Expressed in terms of VaR, our market risk exposure as of September 30, 2024 was ¥1.95 billion, a ¥0.21 billion increase compared to March 31, 2024 primarily due to an increase in U.S. dollar interest rate risk. Our average daily VaR for the six months ended September 30, 2024 was ¥1.91 billion.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | VaR for Trading Activities (April 1, 2024—September 30, 2024) |
| Risk category | Average | | Maximum(1) | | Minimum(1) | | September 30,
2024 | | March 31, 2024 |
| | (in billions) |
| MUFG | ¥ | 1.91 | | | ¥ | 2.32 | | | ¥ | 1.43 | | | ¥ | 1.95 | | | ¥ | 1.74 | |
| Interest rate | 1.56 | | | 1.87 | | | 1.21 | | | 1.51 | | | 1.51 | |
| Yen | 0.75 | | | 1.01 | | | 0.54 | | | 0.68 | | | 0.86 | |
| U.S. Dollars | 1.01 | | | 1.42 | | | 0.72 | | | 0.95 | | | 0.81 | |
| Foreign exchange | 0.73 | | | 1.06 | | | 0.56 | | | 0.65 | | | 0.61 | |
| Equities | 0.46 | | | 0.95 | | | 0.10 | | | 0.73 | | | 0.86 | |
| Commodities | 0.00 | | | 0.00 | | | 0.00 | | | 0.00 | | | 0.00 | |
| Less diversification effect | (0.84) | | | — | | | — | | | (0.94) | | | (1.24) | |
Note:
(1)The maximum and minimum VaR overall and for various risk categories were taken from different days. A simple summation of VaR by risk category is not equal to total VaR due to the effect of diversification.
The average daily VaR by quarter in the six months ended September 30, 2024 was as follows:
| | | | | |
| Quarter | Average daily VaR |
| | (in billions) |
| April–June 2024 | ¥ | 2.03 | |
| July–September 2024 | 1.78 | |
VaR for Non-Trading Activities. The VaR for our total non-trading activities as of September 30, 2024, excluding market risks related to our strategic equity portfolio and measured using an HS-VaR model (holding period, 10 business days; confidence interval, 99%; and observation period, 701 business days), is presented in the table below. The aggregate VaR as of September 30, 2024 was ¥522.7 billion, a ¥55.5 billion decrease from March 31, 2024 primarily due to a decrease in interest rate risk.
Based on a simple sum of figures across market risk categories, interest rate risk accounted for approximately 80% of our total non-trading activity market risks as of September 30, 2024.
In the six months ended September 30, 2024, the average daily interest rate VaR totaled ¥442.6 billion, with the highest recorded VaR being ¥494.7 billion and the lowest being ¥394.7 billion.
For information on our strategic equity portfolio risk management, see “Item 11. Quantitative and Qualitative Disclosures about Credit, Market and Other Risk—Risk Management of Strategic Equity Portfolio” in our annual report on Form 20-F for the fiscal year ended March 31, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | VaR for Non-Trading Activities (April 1, 2024—September 30, 2024) |
| Risk category | Average | | Maximum(1) | | Minimum(1) | | September 30,
2024 | | March 31, 2024 |
| | (in billions) |
| MUFG | ¥ | 508.8 | | | ¥ | 571.9 | | | ¥ | 450.3 | | | ¥ | 522.7 | | | ¥ | 578.2 | |
| Interest rate | 442.6 | | | 494.7 | | | 394.7 | | | 446.3 | | | 501.4 | |
| Yen | 347.9 | | | 440.0 | | | 253.2 | | | 362.4 | | | 435.3 | |
| U.S. Dollars | 270.7 | | | 367.2 | | | 210.2 | | | 275.4 | | | 375.6 | |
| Foreign exchange | 4.6 | | | 9.5 | | | 2.3 | | | 6.2 | | | 7.7 | |
Equities(2) | 100.0 | | | 115.7 | | | 81.6 | | | 107.4 | | | 118.8 | |
| Commodities | 0.3 | | | 1.8 | | | 0.2 | | | 0.2 | | | 0.2 | |
| Less diversification effect | (38.7) | | | — | | | — | | | (37.4) | | | (49.9) | |
Notes:
(1)The maximum and minimum VaR overall and for various risk categories were taken from different days. A simple summation of VaR by risk category is not equal to total VaR due to the effect of diversification.
(2)The equities-related risk figures do not include market risk exposure from our strategic equity portfolio.
The average daily interest rate VaR by quarter in the six months ended September 30, 2024 was as follows:
| | | | | |
| Quarter | Average daily VaR |
| | (in billions) |
| April–June 2024 | ¥ | 454.30 | |
| July–September 2024 | 431.25 | |
Comparing the proportion of each currency’s interest rate VaR to the total interest rate VaR as of September 30, 2024 against that as of March 31, 2024, there was a 2 percentage point increase in the Japanese yen from 53% to 55%, a 3 percentage point decrease in the U.S. dollar from 45% to 42%, and a one percentage point increase in the euro from 2% to 3%.
Limitations of the Market Risk Measurement Model and Related Measures
Actual losses may exceed the value at risk obtained by the application of an HS VaR model in the event, for example, that the market fluctuates to a degree not accounted for in the observation period, or that the correlations among various risk factors, including interest rates and foreign currency exchange rates, deviate from those assumed in the model. In order to complement these weaknesses of the HS-VaR model and measure potential losses that the model is not designed to capture, we conduct stress testing, as appropriate, on our HS-VaR model for our non-trading activities by applying various stress scenarios, including those which take into account estimates regarding future market volatility, in order to better identify risks and manage our portfolio in a more stable and appropriate manner. In addition, we utilize back-testing to verify the effectiveness of our VaR measurement model.
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INDEX
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
| | | | | | | | | | | |
| (in millions) | March 31,
2024
(As Adjusted) | | September 30,
2024 |
| ASSETS | | | |
| Cash and due from banks | ¥ | 4,416,646 | | | ¥ | 4,055,804 | |
| Interest-earning deposits in other banks | 105,701,977 | | | 104,083,772 | |
| Cash, due from banks and interest-earning deposits in other banks | 110,118,623 | | | 108,139,576 | |
| Call loans, funds sold, and receivables under resale agreements | 20,562,358 | | | 19,876,746 | |
| Receivables under securities borrowing transactions | 5,000,816 | | | 5,535,122 | |
| Trading account assets (including assets pledged that secured parties are permitted to sell or repledge of ¥7,370,330 and ¥7,671,947 at March 31, 2024 and September 30, 2024) (including ¥19,716,612 and ¥21,941,994 at March 31, 2024 and September 30, 2024 measured at fair value under fair value option) | 49,769,406 | | | 54,148,540 | |
| Investment securities: | | | |
| Available-for-sale debt securities (including assets pledged that secured parties are permitted to sell or repledge of ¥6,078,544 and ¥3,521,396 at March 31, 2024 and September 30, 2024) | 31,422,967 | | | 26,962,826 | |
| Held-to-maturity debt securities (including assets pledged that secured parties are permitted to sell or repledge of ¥7,345,438 and ¥5,668,316 at March 31, 2024 and September 30, 2024) (fair value of ¥24,557,514 and ¥22,548,633 at March 31, 2024 and September 30, 2024) | 24,843,962 | | | 22,739,448 | |
| Equity securities (including assets pledged that secured parties are permitted to sell or repledge of ¥474 and ¥708 at March 31, 2024 and September 30, 2024) (including ¥5,649,151 and ¥4,553,797 at March 31, 2024 and September 30, 2024 measured at fair value) | 6,132,369 | | | 5,125,231 | |
| Total investment securities | 62,399,298 | | | 54,827,505 | |
| Loans, net of unearned income, unamortized premiums and deferred loan fees (including assets pledged that secured parties are permitted to sell or repledge of ¥124,818 and ¥118,142 at March 31, 2024 and September 30, 2024) | 127,910,303 | | | 130,245,363 | |
| Allowance for credit losses | (1,356,961) | | | (1,370,804) | |
| Net loans | 126,553,342 | | | 128,874,559 | |
| Premises and equipment—net | 872,641 | | | 879,296 | |
| Customers’ acceptance liability | 435,072 | | | 454,608 | |
| Intangible assets—net | 1,297,760 | | | 1,403,157 | |
| Goodwill | 493,758 | | | 676,381 | |
| Other assets (including net of allowance for credit losses of ¥16,757 and ¥18,192 at March 31, 2024 and September 30, 2024) | 20,380,462 | | | 18,122,265 | |
| Total assets | ¥ | 397,883,536 | | | ¥ | 392,937,755 | |
| Assets of consolidated VIEs included in total assets above that can be used only to settle obligations of consolidated VIEs | | | |
| Cash and due from banks | ¥ | 10,146 | | | ¥ | 5,604 | |
| Interest-earning deposits in other banks | 34,166 | | | 62,694 | |
| Trading account assets | 1,266,293 | | | 1,271,717 | |
| Investment securities | 2,320,543 | | | 2,490,850 | |
| Loans | 17,514,131 | | | 16,639,950 | |
| All other assets | 1,463,380 | | | 1,618,463 | |
| Total assets of consolidated VIEs | ¥ | 22,608,659 | | | ¥ | 22,089,278 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)—(Continued)
| | | | | | | | | | | |
| (in millions, except shares) | March 31,
2024
(As Adjusted) | | September 30,
2024 |
| LIABILITIES AND EQUITY | | | |
| Deposits: | | | |
| Domestic offices: | | | |
| Non-interest-bearing | ¥ | 36,105,211 | | | ¥ | 35,641,277 | |
| Interest-bearing | 147,169,199 | | | 147,122,678 | |
| Overseas offices, principally interest-bearing | 63,861,590 | | | 62,127,029 | |
| Total deposits | 247,136,000 | | | 244,890,984 | |
| Call money, funds purchased, and payables under repurchase agreements | 40,784,623 | | | 42,667,578 | |
| Payables under securities lending transactions | 1,016,938 | | | 644,024 | |
| Due to trust account and other short-term borrowings (including ¥54,159 and ¥301,191 at March 31, 2024 and September 30, 2024 measured at fair value under fair value option) | 15,801,323 | | | 27,579,111 | |
| Trading account liabilities | 16,579,522 | | | 16,849,318 | |
| Bank acceptances outstanding | 435,072 | | | 454,608 | |
| Long-term debt (including ¥234,909 and ¥200,462 at March 31, 2024 and September 30, 2024 measured at fair value under fair value option) | 40,012,819 | | | 24,554,156 | |
| Other liabilities | 17,600,152 | | | 15,816,923 | |
| Total liabilities | 379,366,449 | | | 373,456,702 | |
| Commitments and contingent liabilities | | | |
| Mitsubishi UFJ Financial Group shareholders’ equity: | | | |
| Capital stock—common stock authorized, 33,000,000,000 shares; common stock issued, 12,337,710,920 shares and 12,337,710,920 shares at March 31, 2024 and September 30, 2024, with no stated value | 2,090,270 | | | 2,090,270 | |
| Capital surplus | 4,635,892 | | | 4,617,068 | |
| Retained earnings: | | | |
| Appropriated for legal reserve | 239,571 | | | 239,571 | |
| Unappropriated retained earnings | 9,086,490 | | | 9,905,302 | |
| Accumulated other comprehensive income, net of taxes | 2,237,625 | | | 2,480,877 | |
| Treasury stock, at cost—610,482,347 common shares and 671,412,525 common shares at March 31, 2024 and September 30, 2024 | (614,111) | | | (723,219) | |
| Total Mitsubishi UFJ Financial Group shareholders’ equity | 17,675,737 | | | 18,609,869 | |
| Noncontrolling interests | 841,350 | | | 871,184 | |
| Total equity | 18,517,087 | | | 19,481,053 | |
| Total liabilities and equity | ¥ | 397,883,536 | | | ¥ | 392,937,755 | |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Mitsubishi UFJ Financial Group | | | |
| Other short-term borrowings | ¥ | 46,208 | | | ¥ | 40,825 | |
| Long-term debt | 379,017 | | | 440,416 | |
| All other liabilities | 131,066 | | | 135,478 | |
| Total liabilities of consolidated VIEs | ¥ | 556,291 | | | ¥ | 616,719 | |
See the accompanying notes to Condensed Consolidated Financial Statements.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited) | | | | | | | | | | | |
| Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Interest income: | | | |
| Loans, including fees | ¥ | 2,041,490 | | | ¥ | 2,348,070 | |
| Deposits in other banks | 356,085 | | | 372,370 | |
| Investment securities | 355,778 | | | 404,110 | |
| Trading account assets | 360,961 | | | 500,730 | |
| Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | 196,471 | | | 477,197 | |
| Total | 3,310,785 | | | 4,102,477 | |
| Interest expense: | | | |
| Deposits | 1,148,078 | | | 1,462,814 | |
| Call money, funds purchased, and payables under repurchase agreements and securities lending transactions | 462,294 | | | 674,879 | |
| Due to trust account, other short-term borrowings and trading account liabilities | 178,803 | | | 219,395 | |
| Long-term debt | 255,163 | | | 255,240 | |
| Total | 2,044,338 | | | 2,612,328 | |
| Net interest income | 1,266,447 | | | 1,490,149 | |
| Provision for credit losses | 71,912 | | | 128,584 | |
| Net interest income after provision for credit losses | 1,194,535 | | | 1,361,565 | |
| Non-interest income: | | | |
| Fees and commissions income | 886,230 | | | 1,013,028 | |
| Foreign exchange gains (losses) —net | (324,851) | | | 202,840 | |
| Trading account profits (losses) —net | (945,382) | | | 537,284 | |
| Investment securities gains (losses) —net | 746,078 | | | (485,145) | |
| Equity in earnings of equity method investees—net | 215,049 | | | 316,339 | |
| Other non-interest income | 87,164 | | | 109,559 | |
| Total | 664,288 | | | 1,693,905 | |
| Non-interest expense: | | | |
| Salaries and employee benefits | 628,765 | | | 714,830 | |
| Occupancy expenses—net | 77,676 | | | 78,751 | |
| Fees and commissions expenses | 190,172 | | | 203,719 | |
| Outsourcing expenses, including data processing | 161,824 | | | 154,441 | |
| Depreciation of premises and equipment | 36,192 | | | 41,685 | |
| Amortization of intangible assets | 142,271 | | | 145,379 | |
| Insurance premiums, including deposit insurance | 45,062 | | | 48,618 | |
| Communications | 29,731 | | | 31,406 | |
| Taxes and public charges | 53,632 | | | 58,868 | |
| Reversal of off-balance sheet credit instruments | (4,001) | | | (1,342) | |
| Other non-interest expenses | 208,874 | | | 235,038 | |
| Total | 1,570,198 | | | 1,711,393 | |
| Income before income tax expense | 288,625 | | | 1,344,077 | |
| Income tax expense | 16,664 | | | 348,694 | |
| Net income before attribution of noncontrolling interests | 271,961 | | | 995,383 | |
| Net income (loss) attributable to noncontrolling interests | 38,088 | | | (63,838) | |
| Net income attributable to Mitsubishi UFJ Financial Group | ¥ | 233,873 | | | ¥ | 1,059,221 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)—(Continued)
| | | | | | | | | | | |
| Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Income used for the computation of basic EPS and diluted EPS (Numerator): | | | |
| Net income attributable to Mitsubishi UFJ Financial Group | ¥ | 233,873 | | | ¥ | 1,059,221 | |
| Effect of dilutive instruments: | | | |
| Restricted stock units and performance stock units—Morgan Stanley | (1,452) | | | (2,550) | |
| Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group and assumed conversions | ¥ | 232,421 | | | ¥ | 1,056,671 | |
| |
| Six months ended
September 30, |
| (in thousands) | 2023 | | 2024 |
| Shares used for the computation of basic EPS and diluted EPS (Denominator): | | | |
| Weighted average common shares outstanding | 12,037,251 | | | 11,697,335 | |
| Effect of dilutive instruments: | | | |
Stock acquisition rights under the Stock Option Plan and the common shares of MUFG under the Board Incentive Plan and the Employee Stock Ownership Plan(1) | — | | 274 |
| Weighted average common shares for diluted computation | 12,037,251 | | 11,697,609 |
| |
| Six months ended
September 30, |
| (in Yen) | 2023
(As Adjusted) | | 2024 |
| Earnings per common share applicable to common shareholders of Mitsubishi UFJ Financial Group | | | |
| Basic earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | ¥ | 19.43 | | | ¥ | 90.55 | |
Diluted earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group(1) | 19.31 | | | 90.33 | |
——————————
Note:
(1)For the six months ended September 30, 2023 the performance-based plan under the Board Incentive Plan could potentially dilute earnings per common share but were not included in the computation of diluted earnings per common share due to their antidilutive effects.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
| | | | | | | | | | | |
| Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Net income before attribution of noncontrolling interests | ¥ | 271,961 | | | ¥ | 995,383 | |
| Other comprehensive income, net of tax: | | | |
| Net unrealized gains (losses) on investment securities | (162,736) | | | 78,649 | |
| Net debt valuation adjustments | (22,260) | | | 3,051 | |
| Net unrealized gains on derivatives qualifying for cash flow hedges | 1,404 | | | 232 | |
| Defined benefit plans | 48,984 | | | (24,099) | |
| Foreign currency translation adjustments | 1,023,535 | | | 286,518 | |
| Total | 888,927 | | | 344,351 | |
| Comprehensive income | 1,160,888 | | | 1,339,734 | |
| Net income (loss) attributable to noncontrolling interests | 38,088 | | | (63,838) | |
| Other comprehensive income attributable to noncontrolling interests | 68,110 | | | 101,099 | |
| Comprehensive income attributable to Mitsubishi UFJ Financial Group | ¥ | 1,054,690 | | | ¥ | 1,302,473 | |
See the accompanying notes to Condensed Consolidated Financial Statements.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Equity (Unaudited)
| | | | | | | | | | | |
| Six months ended
September 30, |
| (in millions, except per share amount) | 2023
(As Adjusted) | | 2024 |
| Capital stock: | | | |
| Balance at beginning of period | ¥ | 2,090,270 | | | ¥ | 2,090,270 | |
| Balance at end of period | ¥ | 2,090,270 | | | ¥ | 2,090,270 | |
| Capital surplus: | | | |
| Balance at beginning of period | ¥ | 4,902,155 | | | ¥ | 4,635,892 | |
| Stock-based compensation | (6,683) | | | (13,255) | |
| Other—net | (468) | | | (5,569) | |
| Balance at end of period | ¥ | 4,895,004 | | | ¥ | 4,617,068 | |
| Retained earnings appropriated for legal reserve: | | | |
| Balance at beginning of period | ¥ | 239,571 | | | ¥ | 239,571 | |
| Balance at end of period | ¥ | 239,571 | | | ¥ | 239,571 | |
| Unappropriated retained earnings: | | | |
| Balance at beginning of period | ¥ | 8,185,880 | | | ¥ | 9,086,490 | |
| Effect of adopting new guidance on troubled debt restructurings and vintage disclosures | 13,663 | | | — | |
| Net income attributable to Mitsubishi UFJ Financial Group | 233,873 | | | 1,059,221 | |
| Cash dividends: | | | |
| Common stock—¥16.00 per share and ¥20.50 per share in 2023 and 2024 | (192,382) | | | (240,409) | |
| Balance at end of period | ¥ | 8,241,034 | | | ¥ | 9,905,302 | |
| Accumulated other comprehensive income, net of taxes: | | | |
| Balance at beginning of period | ¥ | 871,054 | | | ¥ | 2,237,625 | |
| Net change during the period | 820,817 | | | 243,252 | |
| Balance at end of period | ¥ | 1,691,871 | | | ¥ | 2,480,877 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Equity (Unaudited)—(Continued)
| | | | | | | | | | | |
| | Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Treasury stock, at cost: | | | |
| Balance at beginning of period | ¥ | (482,552) | | | ¥ | (614,111) | |
| Purchases of shares of treasury stock | (68) | | | (118,423) | |
| Sales of shares of treasury stock | 1,666 | | | 9,308 | |
| Net decrease (increase) resulting from changes in interests in consolidated subsidiaries, consolidated VIEs, and affiliated companies | (283) | | | 7 | |
| Balance at end of period | ¥ | (481,237) | | | ¥ | (723,219) | |
| Total Mitsubishi UFJ Financial Group shareholders’ equity | ¥ | 16,676,513 | | | ¥ | 18,609,869 | |
| Noncontrolling interests: | | | |
| Balance at beginning of period | ¥ | 717,219 | | | ¥ | 841,350 | |
| Initial subscriptions of noncontrolling interests | 34,219 | | | 2,363 | |
| Transactions between the consolidated subsidiaries and the related noncontrolling interest shareholders | (16,735) | | | 13,992 | |
| Decrease in noncontrolling interests related to deconsolidation of subsidiaries | (7,405) | | | (1,072) | |
| Decrease in noncontrolling interests related to disposition of subsidiaries | (817) | | | — | |
| Net income (loss) attributable to noncontrolling interests | 38,088 | | | (63,838) | |
| Dividends paid to noncontrolling interests | (17,357) | | | (22,788) | |
| Other comprehensive income, net of taxes | 68,110 | | | 101,099 | |
| Other—net | (186) | | | 78 | |
| Balance at end of period | ¥ | 815,136 | | | ¥ | 871,184 | |
| Total equity | ¥ | 17,491,649 | | | ¥ | 19,481,053 | |
See the accompanying notes to Condensed Consolidated Financial Statements.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited) | | | | | | | | | | | |
| | Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Cash flows from operating activities: | | | |
| Net income before attribution of noncontrolling interests | ¥ | 271,961 | | | ¥ | 995,383 | |
| Adjustments to reconcile net income before attribution of noncontrolling interests to net cash provided by operating activities: | | | |
| Depreciation and amortization (Note 5) | 178,463 | | | 187,064 | |
| Provision for credit losses | 71,912 | | | 128,584 | |
| Investment securities (gains) losses—net | (746,078) | | | 485,145 | |
| Foreign exchange (gains) losses—net | 518,663 | | | (581,822) | |
| Equity in earnings of equity method investees—net | (215,049) | | | (316,339) | |
| Provision (benefit) for deferred income tax expense | (199,482) | | | 96,801 | |
| Increase in trading account assets, excluding foreign exchange contracts | (4,404,033) | | | (1,776,220) | |
| Increase (decrease) in trading account liabilities, excluding foreign exchange contracts | 4,094,299 | | | (425,212) | |
| Increase in accrued interest receivable and other receivables | (186,264) | | | (19,556) | |
| Decrease in accrued interest payable and other payables | (644,637) | | | (377,251) | |
| Net increase (decrease) in accrued income taxes and decrease (increase) in income tax receivables | (55,050) | | | 77,897 | |
| Net decrease (increase) in collateral for derivative transactions | (755,572) | | | 409,188 | |
| Decrease in cash collateral for the use of Bank of Japan’s settlement infrastructure | — | | | 873,000 | |
| Other—net | 170,837 | | | (280,849) | |
| Net cash used in operating activities | (1,900,030) | | | (524,187) | |
| Cash flows from investing activities: | | | |
| Proceeds from sales of Available-for-sale debt securities (including proceeds from debt securities under the fair value option) | 35,279,573 | | | 25,573,028 | |
| Proceeds from maturities of Available-for-sale debt securities (including proceeds from debt securities under the fair value option) | 15,219,441 | | | 23,391,946 | |
| Purchases of Available-for-sale debt securities (including purchases of debt securities under the fair value option) (Note 3) | (42,843,667) | | | (47,046,817) | |
| Proceeds from maturities of Held-to-maturity debt securities | 226,392 | | | 3,456,073 | |
| Purchases of Held-to-maturity debt securities | (2,633,518) | | | (1,666,599) | |
| Proceeds from sales and redemption of Equity securities (including proceeds from equity securities under the fair value option) | 1,192,555 | | | 2,234,565 | |
| Acquisition of HC Consumer Finance Philippines, Inc., a subsidiary of BK, net of cash acquired | (64,104) | | | — | |
| Acquisition of MUFG Pension & Market Services Holdings Limited, a subsidiary of TB, net of cash acquired (Note 2)： | — | | | (91,938) | |
| Purchases of Equity securities (including purchases of equity securities under the fair value option) | (1,350,235) | | | (1,641,403) | |
| Net decrease (increase) in loans | 1,374,285 | | | (3,214,221) | |
| Net decrease (increase) in call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | (2,421,615) | | | 1,637,142 | |
| Capital expenditures for premises and equipment | (47,850) | | | (58,288) | |
| Purchases of intangible assets | (152,945) | | | (148,415) | |
| Proceeds from sales of consolidated VIEs and subsidiaries—net | 46,392 | | | 45,167 | |
| Other—net | (15,465) | | | 72,101 | |
| Net cash provided by investing activities | 3,809,239 | | | 2,542,341 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)—(Continued)
| | | | | | | | | | | |
| Six months ended
September 30, |
| (in millions) | 2023
(As Adjusted) | | 2024 |
| Cash flows from financing activities: | | | |
| Net increase (decrease) in deposits | 2,126,968 | | | (932,669) | |
| Net increase (decrease) in call money, funds purchased, and payables under repurchase agreements and securities lending transactions | (9,762,605) | | | 729,760 | |
| Net increase (decrease) in due to trust account and other short-term borrowings | (475,580) | | | 11,713,964 | |
| Proceeds from issuance of long-term debt | 2,012,445 | | | 1,329,247 | |
| Repayments of long-term debt | (2,022,621) | | | (16,446,445) | |
| Proceeds from sales of treasury stock | 1,504 | | | 11,002 | |
| Dividends paid | (192,313) | | | (240,285) | |
| Payments for acquisition of treasury stock | (68) | | | (118,423) | |
| Other—net | (43,706) | | | (3,780) | |
| Net cash used in financing activities | (8,355,976) | | | (3,957,629) | |
| Effect of exchange rate changes on cash and cash equivalents | 1,559,746 | | | (36,770) | |
| Net decrease in cash and cash equivalents | (4,887,021) | | | (1,976,245) | |
| Cash and cash equivalents at beginning of period | 113,957,445 | | | 110,124,736 | |
| Cash and cash equivalents: | | | |
| Cash, due from banks and interest-earning deposits in other banks | 109,067,365 | | | 108,139,576 | |
| Restricted cash included in other assets | 3,059 | | | 8,915 | |
| Cash and cash equivalents at end of period | ¥ | 109,070,424 | | | ¥ | 108,148,491 | |
| Supplemental disclosure of cash flow information: | | | |
| Cash paid during the period for: | | | |
| Interest | ¥ | 1,988,319 | | | ¥2,673,967 |
| Income taxes, net of refunds | 271,196 | | | 173,996 | |
| Non-cash investing and financing activities: | | | |
| Assets acquired under finance lease arrangements | 9,620 | | | 6,988 | |
| Assets acquired under operating lease arrangements | 22,865 | | | 22,618 | |
| Acquisition of HC Consumer Finance Philippines, Inc., a subsidiary of BK | | | |
| Fair value of assets acquired, excluding cash and cash equivalents | 159,331 | | | — | |
| Fair value of liabilities assumed | 95,448 | | | — | |
| Acquisition of MUFG Pension & Market Services Holdings Limited, a subsidiary of TB (Note 2) | | | |
| Fair value of assets acquired, excluding cash and cash equivalents | — | | | 282,224 | |
| Fair value of liabilities assumed | — | | | 189,312 | |
| | | |
See the accompanying notes to Condensed Consolidated Financial Statements.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
1. BASIS OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Description of Business
Mitsubishi UFJ Financial Group, Inc. (“MUFG”) is a holding company for MUFG Bank, Ltd. (“MUFG Bank” or “BK”), Mitsubishi UFJ Trust and Banking Corporation (“Mitsubishi UFJ Trust and Banking” or “TB”), Mitsubishi UFJ Securities Holdings Co., Ltd. (“Mitsubishi UFJ Securities Holdings”), Mitsubishi UFJ NICOS Co., Ltd. (“Mitsubishi UFJ NICOS”), and other subsidiaries. Mitsubishi UFJ Securities Holdings is an intermediate holding company for Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (“Mitsubishi UFJ Morgan Stanley Securities”). Through its subsidiaries and affiliated companies, MUFG engages in a broad range of financial operations, including commercial banking, investment banking, trust banking and asset management services, securities businesses, and credit card businesses, and it provides related services to individual and corporate customers. See Note 17 for more information by business segment.
Basis of Financial Statements
The accompanying condensed consolidated financial statements are presented in Japanese yen, the currency of the country in which MUFG is incorporated and principally operates. The accompanying condensed consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”). In certain respects, the accompanying condensed consolidated financial statements reflect adjustments to conform with U.S. GAAP and therefore are not included in the consolidated financial statements issued by MUFG in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”) and certain of its subsidiaries in accordance with the corresponding applicable statutory requirements and accounting practices in their respective countries of incorporation. The major adjustments include those relating to (1) investment securities, (2) derivative financial instruments, (3) allowance for credit losses, (4) income taxes, (5) consolidation, (6) premises and equipment, (7) transfer of financial assets, (8) accrued severance indemnities and pension liabilities, (9) goodwill and other intangible assets and (10) lease transactions. The accompanying condensed semiannual consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended March 31, 2024. Certain information that would be included in annual financial statements but is not required for reporting purposes under U.S. GAAP has been omitted or condensed.
Fiscal years of certain subsidiaries, which end on December 31, and MUFG’s fiscal year, which ends on March 31, have been treated as coterminous. Effective April 1, 2024, the MUFG Group changed the fiscal year end of Krungsri’s financial statements consolidated to MUFG, from December 31 to March 31. The MUFG Group believes that this change in accounting principle is preferable as it provides investors with more timely and relevant financial information. We applied this change in accounting principle retrospectively to prior periods. Thus, the condensed consolidated financial statements for the six months ended September 30, 2023 and fiscal year ended March 31, 2024 were adjusted. The following table shows a summary of the adjustments of the condensed consolidated financial statements for the six months ended September 30, 2023 and fiscal year ended March 31, 2024.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| ASSETS | | | | | | | | |
| Cash and due from banks | | ¥ | 4,391,530 | | | ¥ | 25,116 | | | ¥ | 4,416,646 | | | |
| Interest-earning deposits in other banks | | 105,631,633 | | | 70,344 | | | 105,701,977 | | | |
| Cash, due from banks and interest-earning deposits in other banks | | 110,023,163 | | | 95,460 | | | 110,118,623 | | | |
| Call loans, funds sold, and receivables under resale agreements | | 20,233,913 | | | 328,445 | | | 20,562,358 | | | |
| Receivables under securities borrowing transactions | | 5,000,989 | | | (173) | | | 5,000,816 | | | |
| Trading account assets | | 49,745,992 | | | 23,414 | | | 49,769,406 | | | |
| Investment securities: | | | | | | | | |
| Available-for-sale debt securities | | 31,395,372 | | | 27,595 | | | 31,422,967 | | | |
| | | | | | | | |
| Equity securities | | 6,132,092 | | | 277 | | | 6,132,369 | | | |
| Total investment securities | | 62,371,426 | | | 27,872 | | | 62,399,298 | | | |
| Loans, net of unearned income, unamortized premiums and deferred loan fees | | 127,936,495 | | | (26,192) | | | 127,910,303 | | | |
| Allowance for credit losses | | (1,366,221) | | | 9,260 | | | (1,356,961) | | | |
| Net loans | | 126,570,274 | | | (16,932) | | | 126,553,342 | | | |
| Premises and equipment—net | | 873,027 | | | (386) | | | 872,641 | | | |
| Customers’ acceptance liability | | 430,221 | | | 4,851 | | | 435,072 | | | |
| Intangible assets—net | | 1,298,966 | | | (1,206) | | | 1,297,760 | | | |
| Goodwill | | 490,344 | | | 3,414 | | | 493,758 | | | |
| Other assets | | 20,398,146 | | | (17,684) | | | 20,380,462 | | | |
| Total assets | | ¥ | 397,436,461 | | | ¥ | 447,075 | | | ¥ | 397,883,536 | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| | As of March 31, 2024 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Deposits: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Overseas offices, principally interest-bearing | | 63,142,974 | | | 718,616 | | | 63,861,590 | | | |
| Total deposits | | 246,417,384 | | | 718,616 | | | 247,136,000 | | | |
| Call money, funds purchased, and payables under repurchase agreements | | 40,804,921 | | | (20,298) | | | 40,784,623 | | | |
| Payables under securities lending transactions | | 1,016,931 | | | 7 | | | 1,016,938 | | | |
| Due to trust account and other short-term borrowings | | 15,796,947 | | | 4,376 | | | 15,801,323 | | | |
| Trading account liabilities | | 16,587,151 | | | (7,629) | | | 16,579,522 | | | |
| Bank acceptances outstanding | | 430,221 | | | 4,851 | | | 435,072 | | | |
| Long-term debt | | 39,922,322 | | | 90,497 | | | 40,012,819 | | | |
| Other liabilities | | 17,983,371 | | | (383,219) | | | 17,600,152 | | | |
| Total liabilities | | 378,959,248 | | | 407,201 | | | 379,366,449 | | | |
| Commitments and contingent liabilities | | | | | | | | |
| Mitsubishi UFJ Financial Group shareholders’ equity: | | | | | | | | |
| | | | | | | | |
| Capital surplus | | 4,636,097 | | | (205) | | | 4,635,892 | | | |
| Retained earnings: | | | | | | | | |
| | | | | | | | |
| Unappropriated retained earnings | | 9,072,572 | | | 13,918 | | | 9,086,490 | | | |
| Accumulated other comprehensive income, net of taxes | | 2,221,263 | | | 16,362 | | | 2,237,625 | | | |
| | | | | | | | |
| Total Mitsubishi UFJ Financial Group shareholders’ equity | | 17,645,662 | | | 30,075 | | | 17,675,737 | | | |
| Noncontrolling interests | | 831,551 | | | 9,799 | | | 841,350 | | | |
| Total equity | | 18,477,213 | | | 39,874 | | | 18,517,087 | | | |
| Total liabilities and equity | | ¥ | 397,436,461 | | | ¥ | 447,075 | | | ¥ | 397,883,536 | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| Interest income: | | | | | | | | |
| Loans, including fees | | ¥ | 2,011,363 | | | ¥ | 30,127 | | | ¥ | 2,041,490 | | | |
| Deposits in other banks | | 355,192 | | | 893 | | | 356,085 | | | |
| Investment securities | | 355,121 | | | 657 | | | 355,778 | | | |
| Trading account assets | | 360,921 | | | 40 | | | 360,961 | | | |
| Call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | | 193,947 | | | 2,524 | | | 196,471 | | | |
| Total | | 3,276,544 | | | 34,241 | | | 3,310,785 | | | |
| Interest expense: | | | | | | | | |
| Deposits | | 1,142,035 | | | 6,043 | | | 1,148,078 | | | |
| Call money, funds purchased, and payables under repurchase agreements and securities lending transactions | | 461,932 | | | 362 | | | 462,294 | | | |
| Due to trust account, other short-term borrowings and trading account liabilities | | 174,949 | | | 3,854 | | | 178,803 | | | |
| Long-term debt | | 252,757 | | | 2,406 | | | 255,163 | | | |
| Total | | 2,031,673 | | | 12,665 | | | 2,044,338 | | | |
| Net interest income | | 1,244,871 | | | 21,576 | | | 1,266,447 | | | |
| Provision for credit losses | | 61,772 | | | 10,140 | | | 71,912 | | | |
| Net interest income after provision for credit losses | | 1,183,099 | | | 11,436 | | | 1,194,535 | | | |
| Non-interest income: | | | | | | | | |
| Fees and commissions income | | 881,258 | | | 4,972 | | | 886,230 | | | |
| Foreign exchange losses—net | | (329,089) | | | 4,238 | | | (324,851) | | | |
| Trading account losses—net | | (940,660) | | | (4,722) | | | (945,382) | | | |
| Investment securities gains—net | | 743,395 | | | 2,683 | | | 746,078 | | | |
| Equity in earnings of equity method investees—net | | 214,835 | | | 214 | | | 215,049 | | | |
| Other non-interest income | | 86,876 | | | 288 | | | 87,164 | | | |
| Total | | 656,615 | | | 7,673 | | | 664,288 | | | |
| Non-interest expense: | | | | | | | | |
| Salaries and employee benefits | | 623,877 | | | 4,888 | | | 628,765 | | | |
| Occupancy expenses—net | | 76,784 | | | 892 | | | 77,676 | | | |
| Fees and commissions expenses | | 189,657 | | | 515 | | | 190,172 | | | |
| Outsourcing expenses, including data processing | | 162,312 | | | (488) | | | 161,824 | | | |
| Depreciation of premises and equipment | | 35,813 | | | 379 | | | 36,192 | | | |
| Amortization of intangible assets | | 141,668 | | | 603 | | | 142,271 | | | |
| Insurance premiums, including deposit insurance | | 44,684 | | | 378 | | | 45,062 | | | |
| Communications | | 29,391 | | | 340 | | | 29,731 | | | |
| Taxes and public charges | | 52,467 | | | 1,165 | | | 53,632 | | | |
| Reversal of off-balance sheet credit instruments | | (3,646) | | | (355) | | | (4,001) | | | |
| | | | | | | | |
| | | | | | | | |
| Other non-interest expenses | | 202,385 | | | 6,489 | | | 208,874 | | | |
| Total | | 1,555,392 | | | 14,806 | | | 1,570,198 | | | |
| Income before income tax expense | | 284,322 | | | 4,303 | | | 288,625 | | | |
| Income tax expense | | 15,864 | | | 800 | | | 16,664 | | | |
| Net income before attribution of noncontrolling interests | | 268,458 | | | 3,503 | | | 271,961 | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| Net income attributable to noncontrolling interests | | 37,677 | | | 411 | | | 38,088 | | | |
| Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 230,781 | | | ¥ | 3,092 | | | ¥ | 233,873 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| Income used for the computation of basic EPS and diluted EPS (Numerator): | | | | | | | | |
| Net income attributable to Mitsubishi UFJ Financial Group | | ¥ | 230,781 | | | ¥ | 3,092 | | | ¥ | 233,873 | | | |
| | | | | | | | |
| | | | | | | | |
| Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group and assumed conversions | | ¥ | 229,329 | | | ¥ | 3,092 | | | ¥ | 232,421 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in Yen) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| Earnings per common share applicable to common shareholders of Mitsubishi UFJ Financial Group | | | | | | | | |
| Basic earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | ¥ | 19.17 | | | ¥ | 0.26 | | | ¥ | 19.43 | | | |
| Diluted earnings per common share—Earnings applicable to common shareholders of Mitsubishi UFJ Financial Group | | 19.05 | | | 0.26 | | | 19.31 | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| Net income before attribution of noncontrolling interests | | ¥ | 268,458 | | | ¥ | 3,503 | | | ¥ | 271,961 | | | |
| Other comprehensive income, net of tax: | | | | | | | | |
| Net unrealized losses on investment securities | | (162,130) | | | (606) | | | (162,736) | | | |
| | | | | | | | |
| Net unrealized gains on derivatives qualifying for cash flow hedges | | 15 | | | 1,389 | | | 1,404 | | | |
| Defined benefit plans | | 48,965 | | | 19 | | | 48,984 | | | |
| Foreign currency translation adjustments | | 1,050,954 | | | (27,419) | | | 1,023,535 | | | |
| Total | | 915,544 | | | (26,617) | | | 888,927 | | | |
| Comprehensive income | | 1,184,002 | | | (23,114) | | | 1,160,888 | | | |
| Net income attributable to noncontrolling interests | | 37,677 | | | 411 | | | 38,088 | | | |
| Other comprehensive income attributable to noncontrolling interests | | 74,729 | | | (6,619) | | | 68,110 | | | |
| Comprehensive income attributable to Mitsubishi UFJ Financial Group | | ¥ | 1,071,596 | | | ¥ | (16,906) | | | ¥ | 1,054,690 | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions, except per share amount) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Capital surplus: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Other—net | | (467) | | | (1) | | | (468) | | | |
| Balance at end of period | | ¥ | 4,895,005 | | | (1) | | | ¥ | 4,895,004 | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Unappropriated retained earnings: | | | | | | | | |
| Balance at beginning of period | | ¥ | 8,169,710 | | | 16,170 | | | ¥ | 8,185,880 | | | |
| | | | | | | | |
| Net income attributable to Mitsubishi UFJ Financial Group | | 230,781 | | | 3,092 | | | 233,873 | | | |
| | | | | | | | |
| | | | | | | | |
| Balance at end of period | | ¥ | 8,221,772 | | | 19,262 | | | ¥ | 8,241,034 | | | |
| Accumulated other comprehensive income, net of taxes: | | | | | | | | |
| Balance at beginning of period | | ¥ | 844,192 | | | 26,862 | | | ¥ | 871,054 | | | |
| Net change during the period | | 840,815 | | | (19,998) | | | 820,817 | | | |
| Balance at end of period | | ¥ | 1,685,007 | | | 6,864 | | | ¥ | 1,691,871 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions, except per share amount) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Total Mitsubishi UFJ Financial Group shareholders’ equity | | ¥ | 16,650,388 | | | ¥ | 26,125 | | | ¥ | 16,676,513 | | | |
| Noncontrolling interests: | | | | | | | | |
| Balance at beginning of period | | ¥ | 702,821 | | | ¥ | 14,398 | | | ¥ | 717,219 | | | |
| Initial subscriptions of noncontrolling interests | | 34,317 | | | (98) | | | 34,219 | | | |
| Transactions between the consolidated subsidiaries and the related noncontrolling interest shareholders | | (16,734) | | | (1) | | | (16,735) | | | |
| | | | | | | | |
| | | | | | | | |
| Net income attributable to noncontrolling interests | | 37,677 | | | 411 | | | 38,088 | | | |
| Dividends paid to noncontrolling interests | | (17,351) | | | (6) | | | (17,357) | | | |
| Other comprehensive income, net of taxes | | 74,729 | | | (6,619) | | | 68,110 | | | |
| Other—net | | (231) | | | 45 | | | (186) | | | |
| Balance at end of period | | ¥ | 807,006 | | | ¥ | 8,130 | | | ¥ | 815,136 | | | |
| Total equity | | ¥ | 17,457,394 | | | ¥ | 34,255 | | | ¥ | 17,491,649 | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, 2023 | | |
| (in millions) | | As Previously Reported | | Adjustments | | As Adjusted | | |
| Cash flows from operating activities: | | | | | | | | |
| Net income before attribution of noncontrolling interests | | ¥ | 268,458 | | | ¥ | 3,503 | | | ¥ | 271,961 | | | |
| Adjustments to reconcile net income before attribution of noncontrolling interests to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | 177,481 | | | 982 | | | 178,463 | | | |
| Provision for credit losses | | 61,772 | | | 10,140 | | | 71,912 | | | |
| | | | | | | | |
| | | | | | | | |
| Investment securities gains—net | | (743,395) | | | (2,683) | | | (746,078) | | | |
| Foreign exchange losses—net | | 484,560 | | | 34,103 | | | 518,663 | | | |
| Equity in earnings of equity method investees—net | | (214,835) | | | (214) | | | (215,049) | | | |
| Benefit for deferred income tax expense | | (200,007) | | | 525 | | | (199,482) | | | |
| Increase in trading account assets, excluding foreign exchange contracts | | (4,405,363) | | | 1,330 | | | (4,404,033) | | | |
| Increase in trading account liabilities, excluding foreign exchange contracts | | 4,082,033 | | | 12,266 | | | 4,094,299 | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| Increase in accrued interest receivable and other receivables | | (138,342) | | | (47,922) | | | (186,264) | | | |
| Decrease in accrued interest payable and other payables | | (663,358) | | | 18,721 | | | (644,637) | | | |
| Net decrease in accrued income taxes and increase in income tax receivables | | (38,880) | | | (16,170) | | | (55,050) | | | |
| Net increase in collateral for derivative transactions | | (737,229) | | | (18,343) | | | (755,572) | | | |
| Other—net | | (15,161) | | | 185,998 | | | 170,837 | | | |
| Net cash used in operating activities | | (2,082,266) | | | 182,236 | | | (1,900,030) | | | |
| Cash flows from investing activities: | | | | | | | | |
| Proceeds from sales of Available-for-sale debt securities | | 35,278,674 | | | 899 | | | 35,279,573 | | | |
| Proceeds from maturities of Available-for-sale debt securities | | 15,222,492 | | | (3,051) | | | 15,219,441 | | | |
| Purchases of Available-for-sale debt securities | | (42,823,777) | | | (19,890) | | | (42,843,667) | | | |
| | | | | | | | |
| | | | | | | | |
| Proceeds from sales and redemption of Equity securities | | 1,193,033 | | | (478) | | | 1,192,555 | | | |
| Acquisition of HC Consumer Finance Philippines, Inc., a subsidiary of Krungsri, net of cash acquired | | (55,868) | | | (8,236) | | | (64,104) | | | |
| Purchases of Equity securities (including purchases of equity securities under the fair value option) | | (1,351,798) | | | 1,563 | | | (1,350,235) | | | |
| Net decrease in loans | | 1,252,246 | | | 122,039 | | | 1,374,285 | | | |
| Net increase in call loans, funds sold, and receivables under resale agreements and securities borrowing transactions | | (2,635,756) | | | 214,141 | | | (2,421,615) | | | |
| Capital expenditures for premises and equipment | | (47,932) | | | 82 | | | (47,850) | | | |
| Purchases of intangible assets | | (152,072) | | | (873) | | | (152,945) | | | |
| | | | | | | | |
| Other—net | | (31,191) | | | 15,726 | | | (15,465) | | | |
| Net cash provided by investing activities | | 3,487,317 | | | 321,922 | | | 3,809,239 | | | |
| | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Net increase in deposits | | 2,421,039 | | | (294,071) | | | 2,126,968 | | | |
| Net decrease in call money, funds purchased, and payables under repurchase agreements and securities lending transactions | | (9,771,370) | | | 8,765 | | | (9,762,605) | | | |
| Net decrease in due to trust account and other short-term borrowings | | (521,193) | | | 45,613 | | | (475,580) | | | |
| Proceeds from issuance of long-term debt | | 2,022,741 | | | (10,296) | | | 2,012,445 | | | |
| Repayments of long-term debt | | (2,021,065) | | | (1,556) | | | (2,022,621) | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Other—net | | (43,203) | | | (503) | | | (43,706) | | | |
| Net cash used in financing activities | | (8,103,928) | | | (252,048) | | | (8,355,976) | | | |
| Effect of exchange rate changes on cash and cash equivalents | | 1,569,102 | | | (9,356) | | | 1,559,746 | | | |
| Net decrease in cash and cash equivalents | | (5,129,775) | | | 242,754 | | | (4,887,021) | | | |
| Cash and cash equivalents at beginning of period | | 114,044,090 | | | (86,645) | | | 113,957,445 | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash, due from banks and interest-earning deposits in other banks | | 108,911,256 | | | 156,109 | | | 109,067,365 | | | |
| | | | | | | | |
| | | | | | | | |
| Cash and cash equivalents at end of period | | ¥ | 108,914,315 | | | ¥ | 156,109 | | | ¥ | 109,070,424 | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | ¥ | 1,983,677 | | | ¥ | 4,642 | | | ¥ | 1,988,319 | | | |
| Income taxes, net of refunds | | 254,751 | | | 16,445 | | | 271,196 | | | |
| Non-cash investing and financing activities: | | | | | | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | |
| Assets acquired under finance lease arrangements | | 5,022 | | | 4,598 | | | 9,620 | | | |
| Assets acquired under operating lease arrangements | | 22,905 | | | (40) | | | 22,865 | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Acquisition of HC Consumer Finance Philippines, Inc., a subsidiary of BK | | | | | | | | |
| Fair value of assets acquired, excluding cash and cash equivalents | | 151,231 | | | 8,100 | | | 159,331 | | | |
| | | | | | | | |
For the current period ended September 30, 2024, the effects of the change on the condensed consolidated statements of income and condensed consolidated balance sheet are immaterial. The major affected financial statement line items are net decrease in collateral for derivative transactions by ¥44,622 million, net decrease in loans by ¥214,790 million, net decrease in call loans, funds sold, and receivables under resale agreements and securities borrowing transactions by ¥328,578 million, net increase in deposits by ¥766,141 million, net decrease in call money, funds purchased, and payables under repurchase agreements and securities lending transactions by ¥117,990 million, and net increase in due to trust account and other short-term borrowings by ¥224,595 million in the condensed consolidated statements of cash flows.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Changes
Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions—In June 2022, the Financial Accounting Standards Board (“FASB”) issued new guidance which clarifies the guidance when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. The guidance also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The MUFG Group adopted this guidance on April 1, 2024, and there was no material impact on its financial position and results of operations. See Note 18 for further details of disclosures required by this guidance.
Recently Issued Accounting Pronouncements
Improvements to Reportable Segment Disclosures—In November 2023, the FASB issued new guidance which clarifies and enhances the requirements for reportable segment disclosures. This guidance requires additional reportable segment disclosures on an annual and interim basis, primarily about significant segment expenses and other segment items that are regularly provided to the chief operating decision maker and included within the reported measure of segment profit or loss. This guidance does not change how operating segments are identified or aggregated, or how quantitative thresholds are applied to determine the reportable segments. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The MUFG Group is currently evaluating what effect this guidance will have on its segment information disclosures.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
2. BUSINESS DEVELOPMENTS
Acquisition of Link Administration Holdings Limited
On May 16, 2024, Mitsubishi UFJ Trust and Banking acquired 100% of the shares of Link Administration Holdings Limited for ¥113,523 million in cash. The new name of the company is MUFG Pension & Market Services Holdings Limited (“MPMS”).
The global pension and stock administration services will be provided under the new brand name “MUFG Pension & Market Services” driving MUFG to further accelerate its global business expansion via access to Australian funds and global corporate clients, facilitating the Global Investor Services Business to offer a broad range of solutions, allowing it to strengthen its global reach, develop growth opportunities, and expand its business scale.
The assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date. These fair value estimates are considered provisional and are subject to change pending the receipt of additional information in relation to closing date fair values, but not to exceed a period of one year after the closing date of the acquisition. During the six months ended September 30, 2024, the MUFG Group incurred ¥3,856 million of acquisition-related costs. These expenses are included in Other non-interest expenses in the accompanying condensed consolidated statements of income for the six months ended September 30, 2024. The total assets and liabilities of the acquired business were ¥152,035 million, including cash and bank deposits of ¥21,586 million and intangible assets of ¥69,021 million which consist of software and customer relationships, and ¥189,312 million, including long-term borrowings of ¥118,440 million, respectively. The goodwill resulting from the acquisition was ¥151,774 million, which was not deductible for income tax purposes, and was allocated to the Asset Management & Investor Services Business Group Segment. The intangible assets resulting from the acquisition were ¥46,878 million with a weighted average amortization period of 17.8 years. This amount is entirely related to customer relationships. The revenue and net loss of MPMS since the acquisition date were ¥13,354 million and ¥114 million, respectively, for the six months ended September 30, 2024.
Pro forma statements of income
The following unaudited pro forma statements of income present the results of income as if the acquisition of MPMS had occurred on April 1, 2023:
| | | | | | | | | | | |
| Six months ended September 30, |
| 2023 | | 2024 |
| (in millions) |
| Statements of income data | | | |
| Total revenue | ¥ | 74,696 | | | ¥ | 58,886 | |
| Net income attributable to Mitsubishi UFJ Financial Group | ¥ | 19,964 | | | ¥ | 4,678 | |
The unaudited pro forma statements of income include the pro forma adjustments to reflect the impact of amortizing certain acquisition accounting adjustments relating to intangible assets subject to amortization of ¥1,158 million and ¥1,271 million for the six months ended September 30, 2023 and 2024, respectively.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
3. INVESTMENT SECURITIES
The following tables present the amortized cost, gross unrealized gains and losses, and fair value of Available-for-sale debt securities and Held-to-maturity debt securities at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2024 (As Adjusted): | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
| | (in millions) |
| Available-for-sale debt securities: | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 23,287,730 | | | ¥ | 5,768 | | | ¥ | 126,098 | | | ¥ | 23,167,400 | |
| Japanese prefectural and municipal bonds | 1,055,564 | | | 227 | | | 9,800 | | | 1,045,991 | |
| Foreign government and official institution bonds | 3,428,199 | | | 4,981 | | | 130,629 | | | 3,302,551 | |
| Corporate bonds | 1,019,832 | | | 10,685 | | | 4,049 | | | 1,026,468 | |
| Residential mortgage-backed securities | 1,229,615 | | | 255 | | | 345 | | | 1,229,525 | |
| Asset-backed securities | 1,239,772 | | | 9,251 | | | 1,877 | | | 1,247,146 | |
| Other debt securities | 407,917 | | | 3,419 | | | 7,450 | | | 403,886 | |
| Total | ¥ | 31,668,629 | | | ¥ | 34,586 | | | ¥ | 280,248 | | | ¥ | 31,422,967 | |
| Held-to-maturity debt securities: | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 15,191,741 | | | ¥ | 4,745 | | | ¥ | 97,603 | | | ¥ | 15,098,883 | |
| Japanese prefectural and municipal bonds | 1,999,182 | | | 2,048 | | | 16,328 | | | 1,984,902 | |
| Corporate bonds | 119,490 | | | 93 | | | 179 | | | 119,404 | |
| Residential mortgage-backed securities | 4,952,083 | | | 3,153 | | | 179,537 | | | 4,775,699 | |
| Asset-backed securities | 2,581,466 | | | 3,681 | | | 6,521 | | | 2,578,626 | |
| Total | ¥ | 24,843,962 | | | ¥ | 13,720 | | | ¥ | 300,168 | | | ¥ | 24,557,514 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2024: | Amortized
cost | | Gross unrealized gains | | Gross unrealized losses | | Fair value |
| | (in millions) |
| Available-for-sale debt securities: | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 18,761,335 | | | ¥ | 10,245 | | | ¥ | 131,338 | | | ¥ | 18,640,242 | |
| Japanese prefectural and municipal bonds | 871,795 | | | 11 | | | 11,188 | | | 860,618 | |
| Foreign government and official institution bonds | 3,487,233 | | | 16,365 | | | 73,603 | | | 3,429,995 | |
| Corporate bonds | 937,702 | | | 9,761 | | | 5,440 | | | 942,023 | |
| Residential mortgage-backed securities | 1,173,805 | | | 266 | | | 314 | | | 1,173,757 | |
| Asset-backed securities | 1,402,431 | | | 10,739 | | | 515 | | | 1,412,655 | |
| Other debt securities | 501,639 | | | 5,326 | | | 3,429 | | | 503,536 | |
| Total | ¥ | 27,135,940 | | | ¥ | 52,713 | | | ¥ | 225,827 | | | ¥ | 26,962,826 | |
| Held-to-maturity debt securities: | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 13,842,654 | | | ¥ | 14,647 | | | ¥ | 133,864 | | ¥ | 13,723,437 | |
| Japanese prefectural and municipal bonds | 2,216,346 | | | 987 | | | 23,987 | | 2,193,346 | |
| Corporate bonds | 191,305 | | | 157 | | | 544 | | | 190,918 | |
| Residential mortgage-backed securities | 4,670,796 | | | 29,014 | | | 81,381 | | 4,618,429 | |
| Asset-backed securities | 1,818,347 | | | 5,364 | | | 1,208 | | | 1,822,503 | |
| Total | ¥ | 22,739,448 | | | ¥ | 50,169 | | | ¥ | 240,984 | | | ¥ | 22,548,633 | |
Contractual Maturities
The amortized cost and fair values of Held-to-maturity debt securities and the fair values of Available-for-sale debt securities at September 30, 2024 by contractual maturity are shown below. Expected maturities may be shorter than contractual maturities because issuers of debt securities may have the right to call or prepay obligations with or without penalties. Debt securities not due at a single maturity date and securities embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below based on their contractual maturities.
| | | | | | | | | | | | | | | | | |
| Held-to-maturity debt securities | | Available-for-sale debt securities |
| Amortized
cost | | Fair value | | Fair value |
| (in millions) |
| Due in one year or less | ¥ | 2,484,027 | | | ¥ | 2,481,938 | | | ¥ | 16,621,054 | |
| Due from one year to five years | 8,156,136 | | | 8,089,148 | | | 5,235,427 | |
| Due from five years to ten years | 6,548,526 | | | 6,475,490 | | | 2,182,338 | |
| Due after ten years | 5,550,759 | | | 5,502,057 | | | 2,924,007 | |
| Total | ¥ | 22,739,448 | | | ¥ | 22,548,633 | | | ¥ | 26,962,826 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Realized Gains and Losses
For the six months ended September 30, 2023 and 2024, gross realized gains on sales of Available-for-sale debt securities were ¥79,165 million and ¥36,529 million, respectively, and gross realized losses on sales of Available-for-sale debt securities were ¥26,596 million and ¥33,773 million, respectively.
Impairment Losses on Investment Securities
For the six months ended September 30, 2023, impairment losses on Available-for-sale debt securities, mainly comprised of corporate bonds, were included in Investment securities gains (losses)—net in the accompanying condensed consolidated statements of income and were not material.
For the six months ended September 30, 2024, impairment losses on Available-for-sale debt securities of ¥12,825 million, mainly comprised of other debt securities, were included in Investment securities gains (losses)—net in the accompanying condensed consolidated statements of income.
For the six months ended September 30, 2023 and 2024, the MUFG Group’s Held-to-maturity debt securities were guaranteed by Japanese or U.S. government entities or agencies and had a long history of no credit losses or were rated investment grade. Based on the analysis performed, the MUFG Group has the intent and ability to hold these securities to maturity. Therefore, no credit losses were expected on these securities and no impairment loss has been recorded.
Gross Unrealized Losses and Fair Value
The following tables show the gross unrealized losses and fair value of Available-for-sale debt securities at March 31, 2024 and September 30, 2024 by length of time that individual securities in each category have been in a continuous loss position:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or more | | Total |
| At March 31, 2024 (As Adjusted): | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of securities |
| | (in millions, except number of securities) |
| Available-for-sale debt securities: | | | | | | | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥ | 18,640,364 | | | ¥ | 9,427 | | | ¥ | 1,756,792 | | | ¥ | 116,671 | | | ¥ | 20,397,156 | | | ¥ | 126,098 | | | 440 |
| Japanese prefectural and municipal bonds | 416,047 | | | 1,502 | | | 520,133 | | | 8,298 | | | 936,180 | | | 9,800 | | | 574 |
| Foreign government and official institution bonds | 358,973 | | | 9,306 | | | 1,942,369 | | | 121,323 | | | 2,301,342 | | | 130,629 | | | 97 |
| Corporate bonds | 167,004 | | | 467 | | | 442,274 | | | 3,582 | | | 609,278 | | | 4,049 | | | 309 |
| Residential mortgage-backed securities | 185,197 | | | 14 | | | 343,621 | | | 331 | | | 528,818 | | | 345 | | | 14 |
| Asset-backed securities | 23,810 | | | 9 | | | 160,109 | | | 1,868 | | | 183,919 | | | 1,877 | | | 17 |
| Other debt securities | 202,787 | | | 54 | | | 64,908 | | | 7,396 | | | 267,695 | | | 7,450 | | | 56 |
| Total | ¥ | 19,994,182 | | | ¥ | 20,779 | | | ¥ | 5,230,206 | | | ¥ | 259,469 | | | ¥ | 25,224,388 | | | ¥ | 280,248 | | | 1,507 |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Less than 12 months | | 12 months or more | | Total |
| At September 30, 2024: | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Fair value | | Gross
unrealized
losses | | Number of
securities |
| | (in millions, except number of securities) |
| Available-for-sale debt securities: | | | | | | | | | | | | | |
| Japanese national government and Japanese government agency bonds | ¥12,386,848 | | ¥ | 5,407 | | | ¥ | 1,757,038 | | | ¥ | 125,931 | | | ¥ | 14,143,886 | | | ¥ | 131,338 | | | 417 |
| Japanese prefectural and municipal bonds | 167,167 | | | 610 | | | 672,133 | | | 10,578 | | | 839,300 | | | 11,188 | | | 529 |
| Foreign government and official institution bonds | 255,136 | | | 2,852 | | | 1,765,019 | | | 70,751 | | | 2,020,155 | | | 73,603 | | | 83 |
| Corporate bonds | 150,753 | | | 1,119 | | | 459,710 | | | 4,321 | | | 610,463 | | | 5,440 | | | 369 |
| Residential mortgage-backed securities | 207,273 | | | 15 | | | 326,360 | | | 299 | | | 533,633 | | | 314 | | | 15 |
| Asset-backed securities | 118,095 | | | 285 | | | 45,666 | | | 230 | | | 163,761 | | | 515 | | | 19 |
| Other debt securities | 362,704 | | | 321 | | | 50,322 | | | 3,108 | | | 413,026 | | | 3,429 | | | 93 |
| Total | ¥ | 13,647,976 | | | ¥ | 10,609 | | | ¥ | 5,076,248 | | | ¥ | 215,218 | | | ¥ | 18,724,224 | | | ¥ | 225,827 | | | 1,525 |
Evaluating Available-for-sale Debt Securities for Impairment Losses
The following describes the nature of the MUFG Group’s Available-for-sale debt securities and the conclusions reached in determining whether impairment losses exist.
Japanese national government and Japanese government agency bonds, Japanese prefectural and municipal bonds, Foreign government and official institution bonds
As of September 30, 2024, unrealized losses associated with these securities were deemed to be attributable to changes in market interest rates rather than a deterioration in the creditworthiness of the underlying obligor. Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire amortized cost basis of these securities. Accordingly, no credit loss was identified as of September 30, 2024 and no impairment loss has been recorded.
Corporate bonds
As of September 30, 2024, unrealized losses associated with corporate bonds were primarily related to private placement bonds issued by Japanese non-public companies. The credit loss component recognized in earnings is identified as the amount of principal cash flows not expected to be received over the remaining terms of the bonds as estimated using the MUFG Group’s cash flow projections. The key assumptions include probability of default based on credit ratings of the bond issuers and loss given default.
Residential mortgage-backed securities
As of September 30, 2024, unrealized losses associated with these securities were mainly resulting from changes in interest rates and not from changes in credit quality. Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire amortized cost basis of these securities. Accordingly, no credit loss was identified as of September 30, 2024 and no impairment loss had been recorded.
Asset-backed securities
As of September 30, 2024, unrealized losses associated with these securities, other than highly illiquid securities for which fair values are difficult to determine, were mainly resulting from changes in interest rates and not from changes in credit quality. Based on a consideration of factors, including cash flow analysis, the MUFG Group expects to recover the entire amortized cost basis of these securities. For the highly illiquid securities, including certain collateralized loan obligations (“CLOs”), unrealized losses arise from widening credit spreads, deterioration of the credit quality of the underlying collateral, uncertainty regarding the valuation of such securities and the market’s view of the performance of the fund managers. When the fair value of a security is lower than its amortized cost or when any security is subject to a deterioration in credit rating, the MUFG Group undertakes a cash flow analysis of the
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
underlying collateral to estimate the credit loss and confirms the intent and ability to hold these securities until recovery. Based on the analysis performed, no credit loss was identified as of September 30, 2024 and no impairment loss has been recorded.
Equity Securities
The following table presents net realized gains (losses) on sales of equity securities, and net unrealized gains (losses) on equity securities still held at September 30, 2023 and 2024.
| | | | | | | | | | | |
| Six months ended
September 30, |
| 2023
(As Adjusted) | | 2024 |
| (in millions) |
Net gains (losses) recognized during the period(1) | ¥ | 689,090 | | | ¥ | (474,755) | |
| Less: | | | |
| Net gains (losses) recognized during the period on equity securities sold during the period | 19,247 | | | (97,385) | |
| Net unrealized gains (losses) recognized during the reporting period still held at the reporting date | ¥ | 669,843 | | | ¥ | (377,370) | |
Note:
(1)Included in Investment securities gains (losses)—net.
Measurement Alternative of Equity Securities
The following table presents the carrying value of nonmarketable equity securities that are measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes (“measurement alternative”), held at March 31, 2024 and September 30, 2024.
| | | | | | | | | | | |
| March 31,
2024
(As Adjusted) | | September 30,
2024 |
| (in millions) |
| Measurement alternative balance | ¥ | 483,218 | | | ¥ | 571,434 | |
The related adjustments for these securities during the six months ended September 30, 2023 and 2024 were as follows:
| | | | | | | | | | | |
| Six months ended
September 30, |
| 2023 | | 2024 |
| (in millions) |
Measurement alternative impairment losses(1)(4) | ¥ | (8,187) | | | ¥ | (14,782) | |
Measurement alternative downward changes for observable prices(1)(2)(3)(5) | ¥ | (1,567) | | | ¥ | — | |
Measurement alternative upward changes for observable prices(1)(2)(3)(6) | ¥ | 783 | | | ¥ | 6,309 | |
Notes:
(1)Included in Investment securities gains (losses)—net.
(2)Under the measurement alternative, nonmarketable equity securities are carried at cost plus or minus changes resulting from observable prices in orderly transactions for the identical or a similar investment of the same issuer.
(3)The MUFG Group applied measurement alternative downward or upward changes to certain nonmarketable equity securities, resulting from observable prices in orderly transactions, such as partial repurchase and transactions by other entities.
(4)The cumulative impairment losses at March 31, 2024 and September 30, 2024 were ¥29,569 million and ¥43,714 million, respectively.
(5)The cumulative downward changes for observable prices at March 31, 2024 and September 30, 2024 were ¥2,961 million and ¥2,961 million, respectively.
(6)The cumulative upward changes for observable prices at March 31, 2024 and September 30, 2024 were ¥58,104 million and ¥64,386 million, respectively.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
4. LOANS AND ALLOWANCE FOR CREDIT LOSSES
The MUFG Group classifies its loan portfolio into the following portfolio segments—Commercial, Residential, Card, Krungsri, and Other based on the grouping used by the MUFG Group to determine the allowance for credit losses. The MUFG Group further classifies the Commercial segment into classes based on initial measurement attributes, risk characteristics, and its method of monitoring and assessing credit risk. See Note 1 to the consolidated financial statements for the fiscal year ended March 31, 2024 for further information.
Total Outstanding Loans and Past Due Analysis
The table below presents total outstanding loans and past due analysis by class at March 31, 2024 and September 30, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Past Due | | | | | | | | |
At March 31, 2024
(As Adjusted): | 1-3 months | | Greater
Than
3 months | | Total
Past Due | | Current | | Loans
Held for Sale | | Total
Loans | | Past Due 90 Days and
Accruing |
| (in millions) |
| Commercial | | | | | | | | | | | | | |
| Domestic | ¥ | 6,108 | | | ¥ | 8,289 | | | ¥ | 14,397 | | | ¥ | 57,371,397 | | | ¥ | 112,496 | | | ¥ | 57,498,290 | | | ¥ | 3,004 | |
| Foreign | 1,447 | | | 27,517 | | | 28,964 | | | 46,483,163 | | | 841,088 | | | 47,353,215 | | | 13,307 | |
| Residential | 33,943 | | | 11,980 | | | 45,923 | | | 12,451,455 | | | — | | | 12,497,378 | | | 3,837 | |
| Card | 15,790 | | | 28,388 | | | 44,178 | | | 440,672 | | | — | | | 484,850 | | | — | |
| Krungsri | 247,919 | | | 189,558 | | | 437,477 | | | 8,349,705 | | | 17,930 | | | 8,805,112 | | | — | |
| Other | 23,125 | | | 28,553 | | | 51,678 | | | 1,706,489 | | | — | | | 1,758,167 | | | — | |
| Total | ¥ | 328,332 | | | ¥ | 294,285 | | | ¥ | 622,617 | | | ¥ | 126,802,881 | | | ¥ | 971,514 | | | ¥ | 128,397,012 | | | ¥ | 20,148 | |
| Unearned income, unamortized premiums—net and deferred loan fees—net | | | | | | | (486,709) | | | |
| Total | | | | | | | | | | | ¥ | 127,910,303 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Past Due | | | | | | | | |
| At September 30, 2024: | 1-3 months | | Greater
Than
3 months | | Total
Past Due | | Current | | Loans
Held for Sale | | Total
Loans | | Past Due 90 Days and Accruing |
| | (in millions) |
| Commercial | | | | | | | | | | | | | |
| Domestic | ¥ | 9,373 | | | ¥ | 8,091 | | | ¥ | 17,464 | | | ¥ | 62,023,862 | | | ¥ | 139,218 | | | ¥ | 62,180,544 | | | ¥ | 3,441 | |
| Foreign | 684 | | | 24,115 | | | 24,799 | | | 43,813,774 | | | 797,689 | | | 44,636,262 | | | 5,176 | |
| Residential | 32,170 | | | 10,943 | | | 43,113 | | | 12,377,924 | | | — | | | 12,421,037 | | | 3,384 | |
| Card | 15,590 | | | 29,151 | | | 44,741 | | | 440,138 | | | — | | | 484,879 | | | — | |
| Krungsri | 232,459 | | | 236,768 | | | 469,227 | | | 8,535,220 | | | 11,285 | | | 9,015,732 | | | — | |
| Other | 25,262 | | | 33,647 | | | 58,909 | | | 1,933,190 | | | — | | | 1,992,099 | | | — | |
| Total | ¥ | 315,538 | | | ¥ | 342,715 | | | ¥ | 658,253 | | | ¥ | 129,124,108 | | | ¥ | 948,192 | | | ¥ | 130,730,553 | | | ¥ | 12,001 | |
| Unearned income, unamortized premiums—net and deferred loan fees—net | | | | | | | | | | | (485,190) | | | |
| Total | | | | | | | | | | | ¥ | 130,245,363 | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Nonaccrual Loans
Originated loans are generally placed on nonaccrual status when substantial doubt exists as to the full and timely collection of either principal or interest, when principal or interest is contractually past due one month or more with respect to loans within all classes of the Commercial segment, three months or more with respect to loans within the Card, and Krungsri segments, and six months or more with respect to loans within the Residential segment. See Note 1 to the consolidated financial statements for the fiscal year ended March 31, 2024 for further information.
The information on nonaccrual loans by class at March 31, 2024 and September 30, 2024 are shown below:
| | | | | | | | | | | |
| Recorded Loan Balance |
| March 31, 2024 (As Adjusted): | Nonaccrual Loans(1) | | Nonaccrual Loans Not Requiring an Allowance for Credit Losses(2) |
| (in millions) |
| Commercial | | | |
| Domestic | ¥ | 295,055 | | | ¥ | 89,994 | |
| Foreign | 225,572 | | | 59,564 | |
| Residential | 41,101 | | | 4,067 | |
| Card | 72,554 | | | — | |
| Krungsri | 258,511 | | | 7,159 | |
| Other | 33,782 | | | 16 | |
| Total | ¥ | 926,575 | | | ¥ | 160,800 | |
| | | | | | | | | | | |
| | Recorded Loan Balance |
| September 30, 2024: | Nonaccrual Loans(1) | | Nonaccrual Loans Not Requiring an Allowance for Credit Losses(2) |
| | (in millions) |
| Commercial | | | |
| Domestic | ¥ | 305,247 | | | ¥ | 84,885 | |
| Foreign | 258,095 | | | 41,402 | |
| Residential | 38,259 | | | 4,234 | |
| Card | 74,639 | | | — | |
| Krungsri | 313,619 | | | 10,004 | |
| Other | 37,444 | | | 9 | |
| Total | ¥ | 1,027,303 | | | ¥ | 140,534 | |
Notes:
(1)Nonaccrual loans in the above table do not include loans held for sale of ¥396,331 million and ¥326,801 million at March 31, 2024 and September 30, 2024, respectively.
(2)These loans do not require an allowance for credit losses because the recorded loan balance equals, or does not exceed, the present value of expected future cash flows discounted at the loans’ effective interest rate, or the fair value of the collateral if the loan is a collateral-dependent loan.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The following table shows information regarding recognized interest income on nonaccrual loans for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | |
| | September 30,
2023
(As Adjusted) | | September 30, 2024 |
| | (in millions) |
| Commercial | | | | |
| Domestic | | ¥ | 2,209 | | | ¥ | 2,121 | |
| Foreign | | 3,534 | | | 5,026 | |
| Residential | | 276 | | | 237 | |
| Card | | 8 | | | 14 | |
| Krungsri | | 5,225 | | | 7,585 | |
| Other | | 1,549 | | | 1,644 | |
| Total | | ¥ | 12,801 | | | ¥ | 16,627 | |
Loan Modifications
The following table summarizes the MUFG Group’s loan modifications that were made to borrowers experiencing financial difficulty by class for the six months ended September 30, 2023 and 2024:
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2023 (As Adjusted): | Loan Modifications Made to Borrowers Experiencing Financial Difficulty | | Loans Modified within 12 months of Subsequent Default |
| Amortized Cost Basis at the Period End | | Percentage of Total Class of Loans | | Amortized Cost Basis at the Period End |
| (in millions, except percentages) |
Commercial(1) | | | | | |
| Domestic | | | | | |
| Interest rate reduction | ¥ | 2,909 | | | 0.01 | % | | ¥ | — | |
| Term extension | 146,968 | | | 0.27 | | | 2,676 | |
| Combination of interest rate reduction and term extension | 4,774 | | | 0.01 | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
| Foreign | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | 101,054 | | | 0.22 | | | — | |
| Combination of interest rate reduction and term extension | — | | | — | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Residential(1) | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | 8,491 | | | 0.07 | | | 60 | |
| Combination of interest rate reduction and term extension | — | | | — | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Card(2) | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | — | | | — | | | — | |
| Combination of interest rate reduction and term extension | 12,480 | | | 2.61 | | | 1,472 | |
| Combination of term extension and principal forgiveness | 121 | | | 0.03 | | | 1 | |
| All other modifications and combinations | — | | | — | | | — | |
Krungsri(2) | | | | | |
| Interest rate reduction | ¥ | 329 | | | 0.00 | % | | ¥ | 52 | |
| Term extension | 174,300 | | | 1.99 | | | 3,095 | |
| Combination of interest rate reduction and term extension | 992 | | | 0.01 | | | 85 | |
| Combination of term extension and principal forgiveness | 261 | | | 0.00 | | | 4,072 | |
| All other modifications and combinations | 919 | | | 0.01 | | | 48 | |
Other(2) | | | | | |
| Interest rate reduction | ¥ | 250 | | | 0.01 | % | | ¥ | 185 | |
| Term extension | 1,569 | | | 0.09 | | | 290 | |
| Combination of interest rate reduction and term extension | 149 | | | 0.01 | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2024: | Loan Modifications Made to Borrowers Experiencing Financial Difficulty | | Loans Modified within 12 months of Subsequent Default |
| Amortized Cost Basis at the Period End | | Percentage of Total Class of Loans | | Amortized Cost Basis at the Period End |
| (in millions, except percentages) |
Commercial(1) | | | | | |
| Domestic | | | | | |
| Interest rate reduction | ¥ | 530 | | | 0.00 | % | | ¥ | — | |
| Term extension | 162,309 | | | 0.26 | | | 3,216 | |
| Combination of interest rate reduction and term extension | 3,864 | | | 0.01 | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
| Foreign | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | 74,732 | | | 0.17 | | | — | |
| Combination of interest rate reduction and term extension | — | | | — | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Residential(1) | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | 6,137 | | | 0.05 | | | 180 | |
| Combination of interest rate reduction and term extension | — | | | — | | | — | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Card(2) | | | | | |
| Interest rate reduction | ¥ | — | | | — | % | | ¥ | — | |
| Term extension | — | | | — | | | — | |
| Combination of interest rate reduction and term extension | 12,828 | | | 2.65 | | | 1,541 | |
| Combination of term extension and principal forgiveness | 126 | | | 0.03 | | | 2 | |
| All other modifications and combinations | — | | | — | | | — | |
Krungsri(2) | | | | | |
| Interest rate reduction | ¥ | 466 | | | 0.01 | % | | ¥ | 4 | |
| Term extension | 143,449 | | | 1.59 | | | 4,495 | |
| Combination of interest rate reduction and term extension | 2,613 | | | 0.03 | | | 105 | |
| Combination of term extension and principal forgiveness | 1,558 | | | 0.02 | | | 40 | |
| All other modifications and combinations | 867 | | | 0.01 | | | 2 | |
Other(2) | | | | | |
| Interest rate reduction | ¥ | 831 | | | 0.04 | % | | ¥ | — | |
| Term extension | 6,626 | | | 0.33 | | | 1,121 | |
| Combination of interest rate reduction and term extension | — | | | — | | | 4 | |
| Combination of term extension and principal forgiveness | — | | | — | | | — | |
| All other modifications and combinations | — | | | — | | | — | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Notes:
(1)The modified loans for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2)The modified loans for the Card, Krungsri and Other segments include accrual and nonaccrual loans.
Loan modifications made to borrowers experiencing financial difficulty for the Commercial and Residential segments in the above tables include accruing loans, and do not include nonaccrual loans. Once a loan is classified as a nonaccrual loan, a modification would have little likelihood of resulting in the recovery of the loan in view of the severity of the financial difficulty of the borrower. Therefore, even if a nonaccrual loan is modified, the loan continues to be classified as a nonaccrual loan. The vast majority of modifications to nonaccrual loans are temporary extensions of the maturity dates, typically for periods up to 90 days, and continually made as the borrower is unable to repay or refinance the loan at the extended maturity. Accordingly, the impact of such loans on the period-ended amortized cost basis is immaterial, and the vast majority of nonaccrual modified loans have subsequently defaulted.
Loans that had a payment default during the period and had been modified to borrowers experiencing financial difficulty at the time of the modification within the previous 12 months preceding the payment default in the Commercial and Residential segments in the above tables include those accruing loans that became past due one month or more within the Commercial segment and six months or more within the Residential segment, and those accruing loans reclassified to nonaccrual loans due to financial difficulties even without delinquencies. This is because classification as a nonaccrual loan is regarded as default under the MUFG Group’s credit policy. Additionally, the MUFG Group defines default as payment default for the purpose of the disclosure.
In regards to the Card, Krungsri and Other segments, loan modifications made to borrowers experiencing financial difficulty in the above tables represent nonaccrual and accruing loans, and the defaulted loans in the above table represent nonaccrual and accruing loans that became past due one month or more within the Card segment, and six months or more within the Krungsri segment.
Historical payment defaults are one of the factors considered when determining the allowance for credit losses, and are factored into projecting future cash flows for segments other than the Card segment, for which such default information is considered when using collectively-assessed allowance methodology.
The following table provides the financial effect of the modifications made to borrowers experiencing financial difficulty by class for the six months ended September 30, 2023 and 2024:
| | | | | | | | |
Six months ended September 30, 2023
(As Adjusted): | | Financial Effect |
| Commercial | | |
| Domestic | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 0.06%. |
| Term extension | | Added a weighted-average 0.8 years to the life of loans. |
| | |
| Foreign | | |
| | |
| Term extension | | Added a weighted-average 0.5 years to the life of loans. |
| | |
| Residential | | |
| | |
| Term extension | | Added a weighted-average 1.3 years to the life of loans. |
| | |
| Card | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 15.24%. |
| Term extension | | Added a weighted-average 3.0 years to the life of loans. |
| Principal forgiveness | | Reduced the principal balance of the loans by ¥404 million. |
| Krungsri | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 1.29%. |
| Term extension | | Added a weighted-average 1.7 years to the life of loans. |
| Principal forgiveness | | Reduced the principal balance of the loans by ¥563 million. |
| Other | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 3.40%. |
| Term extension | | Added a weighted-average 3.0 years to the life of loans. |
| | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | |
| Six months ended September 30, 2024: | | Financial Effect |
| Commercial | | |
| Domestic | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 0.16%. |
| Term extension | | Added a weighted-average 0.8 years to the life of loans. |
| | |
| Foreign | | |
| | |
| Term extension | | Added a weighted-average 0.6 years to the life of loans. |
| | |
| Residential | | |
| | |
| Term extension | | Added a weighted-average 1.2 years to the life of loans. |
| | |
| Card | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 15.22%. |
| Term extension | | Added a weighted-average 3.0 years to the life of loans. |
| Principal forgiveness | | Reduced the principal balance of the loans by ¥431 million. |
| Krungsri | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 1.79%. |
| Term extension | | Added a weighted-average 3.6 years to the life of loans. |
| Principal forgiveness | | Reduced the principal balance of the loans by ¥658 million. |
| Other | | |
| Interest rate reduction | | Reduced weighted-average contractual interest rate by 8.30%. |
| Term extension | | Added a weighted-average 1.0 year to the life of loans. |
| | |
The following table provides the performance of loans that have been modified in the last 12 months to borrowers experiencing financial difficulty by class for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2023 (As Adjusted): | Payment Status (Amortized Cost Basis at the Period End) |
| Current | | 1-3 months Past Due | | Greater Than 3 months Past Due |
| (in millions) |
Commercial(1) | | | | | |
| Domestic | ¥ | 266,915 | | | ¥ | 305 | | | ¥ | 470 | |
| Foreign | 108,618 | | | — | | | — | |
Residential(1) | 16,094 | | | 948 | | | 214 | |
Card(2) | 16,816 | | | 4,270 | | | 1,973 | |
Krungsri(2) | 283,343 | | | 14,007 | | | 11,654 | |
Other(2) | 4,068 | | | 591 | | | 188 | |
| Total | ¥ | 695,854 | | | ¥ | 20,121 | | | ¥ | 14,499 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | |
| Six months ended September 30, 2024: | Payment Status (Amortized Cost Basis at the Period End) |
| Current | | 1-3 months Past Due | | Greater Than 3 months Past Due |
| (in millions) |
Commercial(1) | | | | | |
| Domestic | ¥ | 324,632 | | | ¥ | 100 | | | ¥ | 62 | |
| Foreign | 90,234 | | | — | | | — | |
Residential(1) | 11,403 | | | 603 | | | 121 | |
Card(2) | 18,127 | | | 4,034 | | | 2,005 | |
Krungsri(2) | 215,377 | | | 25,118 | | | 25,376 | |
Other(2) | 7,371 | | | 3,414 | | | 1,039 | |
| Total | ¥ | 667,144 | | | ¥ | 33,269 | | | ¥ | 28,603 | |
Notes:
(1)The modified loans for the Commercial and Residential segments include accruing loans, and do not include nonaccrual loans.
(2)The modified loans for the Card, Krungsri and Other segments include accrual and nonaccrual loans.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Credit Quality Indicator
Credit quality indicators of loans and fiscal year of origination by class at March 31, 2024, and gross charge-offs for the fiscal year ended March 31, 2024 are shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans
Amortized Cost Basis by Origination Year | | Revolving
Loans
Amortized
Cost Basis | | Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis | | Total(1) |
At March 31, 2024
(As Adjusted): | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | |
| (in millions) |
| Commercial: | ¥ | 36,089,439 | | | ¥ | 13,326,456 | | | ¥ | 7,110,866 | | | ¥ | 5,965,489 | | | ¥ | 4,197,181 | | | ¥ | 9,777,389 | | | ¥ | 27,367,612 | | | ¥ | 63,489 | | | ¥ | 103,897,921 | |
| Domestic | 20,392,832 | | | 7,709,706 | | | 4,897,276 | | | 5,099,173 | | | 3,195,961 | | | 7,915,170 | | | 8,175,676 | | | — | | | 57,385,794 | |
| Normal | 20,168,687 | | | 7,567,872 | | | 4,700,171 | | | 4,955,680 | | | 3,058,292 | | | 7,289,232 | | | 7,918,471 | | | — | | | 55,658,405 | |
| Close Watch | 212,521 | | | 132,768 | | | 182,359 | | | 120,759 | | | 91,961 | | | 524,833 | | | 242,574 | | | — | | | 1,507,775 | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 11,624 | | | 9,066 | | | 14,746 | | | 22,734 | | | 45,708 | | | 101,105 | | | 14,631 | | | — | | | 219,614 | |
| Gross charge-offs | 2,478 | | | 26,192 | | | 1,379 | | | 2,669 | | | 9,904 | | | 8 | | | — | | | — | | | 42,630 | |
| Foreign | 15,696,607 | | | 5,616,750 | | | 2,213,590 | | | 866,316 | | | 1,001,220 | | | 1,862,219 | | | 19,191,936 | | | 63,489 | | | 46,512,127 | |
| Normal | 15,305,350 | | | 5,445,830 | | | 2,166,976 | | | 827,405 | | | 877,978 | | | 1,680,485 | | | 18,889,310 | | | 60,877 | | | 45,254,211 | |
| Close Watch | 330,450 | | | 142,807 | | | 41,638 | | | 23,625 | | | 110,527 | | | 129,927 | | | 269,944 | | | — | | | 1,048,918 | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 60,807 | | | 28,113 | | | 4,976 | | | 15,286 | | | 12,715 | | | 51,807 | | | 32,682 | | | 2,612 | | | 208,998 | |
| Gross charge-offs | 9,301 | | | 8,575 | | | 1,057 | | | 794 | | | 174 | | | 130 | | | 10,131 | | | — | | | 30,162 | |
| Residential | ¥ | 668,170 | | | ¥ | 659,156 | | | ¥ | 714,292 | | | ¥ | 573,679 | | | ¥ | 864,058 | | | ¥ | 8,997,473 | | | ¥ | 20,550 | | | ¥ | — | | | ¥ | 12,497,378 | |
| Accrual | 668,118 | | | 658,831 | | | 714,154 | | | 573,444 | | | 863,432 | | | 8,959,995 | | | 18,891 | | | — | | | 12,456,865 | |
| Nonaccrual | 52 | | | 325 | | | 138 | | | 235 | | | 626 | | | 37,478 | | | 1,659 | | | — | | | 40,513 | |
| Gross charge-offs | — | | | — | | | 2 | | | 6 | | | 28 | | | 1,253 | | | — | | | — | | | 1,289 | |
| Card | ¥ | 21 | | | ¥ | 181 | | | ¥ | 224 | | | ¥ | 269 | | | ¥ | 207 | | | ¥ | 638 | | | ¥ | 409,416 | | | ¥ | 73,894 | | | ¥ | 484,850 | |
| Accrual | — | | | 10 | | | 7 | | | 7 | | | 9 | | | 34 | | | 396,746 | | | 15,483 | | | 412,296 | |
| Nonaccrual | 21 | | | 171 | | | 217 | | | 262 | | | 198 | | | 604 | | | 12,670 | | | 58,411 | | | 72,554 | |
| Gross charge-offs | 18 | | | 63 | | | 100 | | | 112 | | | 97 | | | 117 | | | 9,712 | | | 10,801 | | | 21,020 | |
| Krungsri | ¥ | 2,133,219 | | | ¥ | 1,481,834 | | | ¥ | 811,883 | | | ¥ | 401,052 | | | ¥ | 431,766 | | | ¥ | 768,770 | | | ¥ | 2,741,676 | | | ¥ | 16,982 | | | ¥ | 8,787,182 | |
| Performing | 1,986,177 | | | 1,319,372 | | | 685,123 | | | 337,985 | | | 330,511 | | | 578,608 | | | 2,578,069 | | | — | | | 7,815,845 | |
| Under-Performing | 110,487 | | | 108,846 | | | 86,273 | | | 49,140 | | | 80,033 | | | 141,150 | | | 136,897 | | | — | | | 712,826 | |
| Non-Performing | 36,555 | | | 53,616 | | | 40,487 | | | 13,927 | | | 21,222 | | | 49,012 | | | 26,710 | | | 16,982 | | | 258,511 | |
| Gross charge-offs | 8,765 | | | 55,828 | | | 34,544 | | | 12,995 | | | 15,439 | | | 19,729 | | | 30,709 | | | 2,632 | | | 180,641 | |
| Other | ¥ | 749,054 | | | ¥ | 296,723 | | | ¥ | 94,173 | | | ¥ | 45,408 | | | ¥ | 26,103 | | | ¥ | 87,724 | | | ¥ | 458,982 | | | ¥ | — | | | ¥ | 1,758,167 | |
| Accrual | 743,600 | | | 291,516 | | | 92,176 | | | 44,523 | | | 24,642 | | | 82,574 | | | 445,355 | | | — | | | 1,724,386 | |
| Nonaccrual | 5,454 | | | 5,207 | | | 1,997 | | | 885 | | | 1,461 | | | 5,150 | | | 13,627 | | | — | | | 33,781 | |
| Gross charge-offs | 4,815 | | | 15,962 | | | 6,212 | | | 1,810 | | | 785 | | | 3,036 | | | 6,013 | | | — | | | 38,633 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Credit quality indicators of loans and fiscal year of origination by class at September 30, 2024, and gross charge-offs for the six months ended September 30, 2024 are shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Term Loans
Amortized Cost Basis by Origination Year | | Revolving
Loans
Amortized
Cost Basis | | Revolving
Loans
Converted to
Term Loans
Amortized
Cost Basis | | Total(1) |
| At September 30, 2024: | 2024 | | 2023 | | 2022 | | 2021 | | 2020 | | Prior | |
| | (in millions) |
| Commercial: | ¥ | 26,191,966 | | | ¥ | 18,731,354 | | | ¥ | 11,345,368 | | | ¥ | 5,779,064 | | | ¥ | 5,072,732 | | | ¥ | 11,714,913 | | | ¥ | 26,980,476 | | | ¥ | 64,026 | | | ¥ | 105,879,899 | |
| Domestic | 19,422,041 | | | 8,755,355 | | | 6,865,865 | | | 4,297,863 | | | 4,468,287 | | | 9,564,233 | | | 8,667,682 | | | — | | | 62,041,326 | |
| Normal | 19,317,740 | | | 8,574,120 | | | 6,726,304 | | | 4,093,158 | | | 4,313,060 | | | 8,887,916 | | | 8,447,688 | | | — | | | 60,359,986 | |
| Close Watch | 65,061 | | | 174,201 | | | 107,633 | | | 191,545 | | | 134,305 | | | 564,721 | | | 208,663 | | | — | | | 1,446,129 | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 39,240 | | | 7,034 | | | 31,928 | | | 13,160 | | | 20,922 | | | 111,596 | | | 11,331 | | | — | | | 235,211 | |
| Gross charge-offs | 862 | | | 2,055 | | | 589 | | | 332 | | | 191 | | | 1,780 | | | 211 | | | — | | | 6,020 | |
| Foreign | 6,769,925 | | | 9,975,999 | | | 4,479,503 | | | 1,481,201 | | | 604,445 | | | 2,150,680 | | | 18,312,794 | | | 64,026 | | | 43,838,573 | |
| Normal | 6,690,117 | | | 9,654,989 | | | 4,297,828 | | | 1,447,782 | | | 579,913 | | | 1,904,520 | | | 17,985,700 | | | 61,854 | | | 42,622,703 | |
| Close Watch | 59,543 | | | 216,179 | | | 153,292 | | | 33,419 | | | 13,820 | | | 190,536 | | | 306,324 | | | — | | | 973,113 | |
| Likely to become Bankrupt or Legally/Virtually Bankrupt | 20,265 | | | 104,831 | | | 28,383 | | | — | | | 10,712 | | | 55,624 | | | 20,770 | | | 2,172 | | | 242,757 | |
| Gross charge-offs | 84 | | | 255 | | | 1,632 | | | 2,507 | | | — | | | — | | | 7,687 | | | — | | | 12,165 | |
| Residential | ¥ | 474,295 | | | ¥ | 651,183 | | | ¥ | 640,862 | | | ¥ | 692,280 | | | ¥ | 554,851 | | | ¥ | 9,388,304 | | | ¥ | 19,262 | | | ¥ | — | | | ¥ | 12,421,037 | |
| Accrual | 474,221 | | | 651,131 | | | 640,544 | | | 692,025 | | | 554,606 | | | 9,352,910 | | | 17,847 | | | — | | | 12,383,284 | |
| Nonaccrual | 74 | | | 52 | | | 318 | | | 255 | | | 245 | | | 35,394 | | | 1,415 | | | — | | | 37,753 | |
| Gross charge-offs | — | | | — | | | 5 | | | 32 | | | — | | | 38 | | | — | | | — | | | 75 | |
| Card | ¥ | — | | | ¥ | 82 | | | ¥ | 208 | | | ¥ | 296 | | | ¥ | 270 | | | ¥ | 749 | | | ¥ | 406,304 | | | ¥ | 76,970 | | | ¥ | 484,879 | |
| Accrual | — | | | 3 | | | 5 | | | 9 | | | 8 | | | 35 | | | 393,880 | | | 16,300 | | | 410,240 | |
| Nonaccrual | — | | | 79 | | | 203 | | | 287 | | | 262 | | | 714 | | | 12,424 | | | 60,670 | | | 74,639 | |
| Gross charge-offs | — | | | 28 | | | 85 | | | 56 | | | 81 | | | 116 | | | 4,855 | | | 6,063 | | | 11,284 | |
| Krungsri | ¥ | 928,828 | | | ¥ | 1,836,210 | | | ¥ | 1,249,486 | | | ¥ | 698,095 | | | ¥ | 302,590 | | | ¥ | 1,072,009 | | | ¥ | 2,895,885 | | | ¥ | 21,344 | | | ¥ | 9,004,447 | |
| Performing | 844,687 | | | 1,631,629 | | | 1,084,838 | | | 577,836 | | | 243,477 | | | 780,640 | | | 2,673,984 | | | 7 | | | 7,837,098 | |
| Under-Performing | 74,026 | | | 143,796 | | | 114,958 | | | 80,762 | | | 44,511 | | | 215,623 | | | 180,054 | | | — | | | 853,730 | |
| Non-Performing | 10,115 | | | 60,785 | | | 49,690 | | | 39,497 | | | 14,602 | | | 75,746 | | | 41,847 | | | 21,337 | | | 313,619 | |
| Gross charge-offs | 316 | | | 19,866 | | | 32,303 | | | 13,408 | | | 4,227 | | | 12,068 | | | 15,920 | | | 2,922 | | | 101,030 | |
| Other | ¥ | 498,369 | | | ¥ | 517,076 | | | ¥ | 255,062 | | | ¥ | 70,049 | | | ¥ | 42,070 | | | ¥ | 108,806 | | | ¥ | 500,667 | | | ¥ | — | | | ¥ | 1,992,099 | |
| Accrual | 497,934 | | | 506,826 | | | 250,915 | | | 68,607 | | | 41,119 | | | 101,731 | | | 487,523 | | | — | | | 1,954,655 | |
| Nonaccrual | 435 | | | 10,250 | | | 4,147 | | | 1,442 | | | 951 | | | 7,075 | | | 13,144 | | | — | | | 37,444 | |
| Gross charge-offs | 659 | | | 14,191 | | | 6,386 | | | 1,898 | | | 215 | | | 1,303 | | | 3,151 | | | — | | | 27,803 | |
Note:
(1)Total loans in the above table do not include loans held for sale, and represent balances without adjustments in relation to unearned income, unamortized premiums and deferred loan fees.
For a discussion and explanation of the MUFG Group’s credit quality indicator, see Note 4 to the consolidated financial statements for the fiscal year ended March 31, 2024.
For the Commercial, Residential, Card and Krungsri segments, credit quality indicators at March 31, 2024 and September 30, 2024 are based on information as of March 31, 2024 and September 30, 2024, respectively. For the Other segment, credit quality indicators at March 31, 2024 and September 30, 2024 are generally based on information as of December 31, 2023 and June 30, 2024, respectively.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Allowance for Credit Losses
Effective as of April 1, 2023, the MUFG Group adopted new guidance on measurement of credit losses on financial instruments for loan modifications made to borrowers experiencing financial difficulty.
Under the new guidance, the MUFG Group adopts a discounted cash flow methodology that utilizes a discount rate based on the post-modification contractual interest rate, other than those in the Card segment, for which the allowance is measured using collectively-assessed allowance methodology.
Changes in the allowance for credit losses of loans by portfolio segment for the six months ended September 30, 2023 and 2024 are shown below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Six months ended September 30, 2023
(As Adjusted): | | Commercial | | Residential | | Card | | Krungsri | | Other | | Total | |
| | (in millions) | |
| Allowance for credit losses: | | | | | | | | | | | | | |
| Balance at beginning of period | | ¥ | 719,589 | | | ¥ | 59,747 | | | ¥ | 42,469 | | | ¥ | 364,647 | | | ¥ | 93,062 | | | ¥ | 1,279,514 | | |
| Provision for (reversal of) credit losses | | (17,974) | | | 433 | | | 10,255 | | | 57,443 | | | 21,755 | | | 71,912 | | |
| Charge-offs | | 36,943 | | | 459 | | | 10,158 | | | 69,152 | | | 15,929 | | | 132,641 | | |
| Recoveries collected | | 9,720 | | | 2 | | | 393 | | | 15,931 | | | 8,491 | | | 34,537 | | |
| | | | | | | | | | | | | |
| Net charge-offs | | 27,223 | | | 457 | | | 9,765 | | | 53,221 | | | 7,438 | | | 98,104 | | |
Other(1)(2) | | 1,580 | | | — | | | (7,666) | | | 38,096 | | | 11,159 | | | 43,169 | | |
| | | | | | | | | | | | | |
| Balance at end of period | | ¥ | 675,972 | | | ¥ | 59,723 | | | ¥ | 35,293 | | | ¥ | 406,965 | | | ¥ | 118,538 | | | ¥ | 1,296,491 | | |
| | | | | | | | |
| Six months ended September 30, 2024: | | Commercial | | Residential | | Card | | Krungsri | | Other | | Total | |
| | (in millions) | |
| Allowance for credit losses: | | | | | | | | | | | | | |
| Balance at beginning of period | | ¥ | 745,514 | | | ¥ | 56,964 | | | ¥ | 36,423 | | | ¥ | 405,211 | | | ¥ | 112,849 | | | ¥ | 1,356,961 | | |
| Provision for (reversal of) credit losses | | 14,650 | | | (2,408) | | | 13,895 | | | 76,414 | | | 26,033 | | | 128,584 | | |
| Charge-offs | | 18,185 | | | 75 | | | 11,284 | | | 101,030 | | | 27,803 | | | 158,377 | | |
| Recoveries collected | | 5,759 | | | 5 | | | 512 | | | 18,452 | | | 6,967 | | | 31,695 | | |
| | | | | | | | | | | | | |
| Net charge-offs | | 12,426 | | | 70 | | | 10,772 | | | 82,578 | | | 20,836 | | | 126,682 | | |
Other(1) | | (16,651) | | | — | | | — | | | 19,772 | | | 8,820 | | | 11,941 | | |
| | | | | | | | | | | | | |
| Balance at end of period | | ¥ | 731,087 | | | ¥ | 54,486 | | | ¥ | 39,546 | | | ¥ | 418,819 | | | ¥ | 126,866 | | | ¥ | 1,370,804 | | |
Notes:
(1)Other is principally comprised of gains or losses from foreign exchange translation.
(2)For the six months ended September 30, 2023, Other includes the impact of the change in accounting principle relating to the recognition and measurement of troubled debt restructurings, which was adopted on April 1, 2023. The total impact across all segments was negative of ¥18,869 million.
The MUFG Group sold ¥1,206 billion and ¥1,761 billion of loans within the Commercial segment during the six months ended September 30, 2023 and 2024, respectively.
Collateral Dependent Loans
The MUFG Group uses, as a practical expedient, the fair value of the collateral when recording the net carrying amounts of loans and determining the allowance for credit losses of such loans, for which the repayment is expected to be provided substantially through the operation or sale of the collateral, when the borrower is experiencing financial difficulty based on the assessment as of the reporting date.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
For the Commercial, Krungsri and Other segments, collateral relating to these loans was comprised primarily of real estate, and to a lesser extent, exchange traded equity securities and deposits, etc. For the Residential segment, collateral on these loans was mainly real estate.
Other Financial Receivable
Accounts receivable-Other, which is included in Other assets in the accompanying condensed consolidated balance sheets, amounted to ¥1,951,742 million and ¥1,919,320 million as of March 31, 2024 and September 30, 2024, respectively, and were primarily comprised of receivables relating to the credit card business. The provision or reversal of the allowance for credit losses relating to the receivables was included in Non-interest expense on the condensed consolidated statements of income. The credit quality for these receivables is primarily evaluated based on the extent of delinquency.
The outstanding balance of these account receivables are presented on a net basis after allowance for credit losses. The change of allowance for credit losses during the six months ended September 30, 2023 and 2024 is primarily due to provision or reversal of the allowance for the receivables.
There are de minimis or zero expected credit losses, for example, for lending and financing transactions, such as Interest-earning deposits in other banks, Call loans and funds sold, Receivables under resale agreements and Receivables under securities borrowing transactions because the term is short and the credit quality of the borrowers is normal.
Accrued interest receivable totaled ¥737,947 million and ¥694,666 million as of March 31, 2024 and September 30, 2024, respectively, and is included in Other assets on the condensed consolidated balance sheets.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
5. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The table below presents the movement in the carrying amount of goodwill during the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | |
| Six months ended
September 30, | |
| 2023
(As Adjusted) | | 2024 | |
| (in millions) | |
| Balance at beginning of period | | | | |
Goodwill(1) | ¥ | 889,524 | | | ¥ | 1,086,510 | | |
Accumulated impairment losses(1) | (592,752) | | | (592,752) | | |
| 296,772 | | | 493,758 | | |
| Goodwill acquired during the six months | 67,227 | | | 151,774 | | (2) |
| Foreign currency translation adjustments and other | 23,104 | | | 30,849 | | |
| Balance at end of period | | | | |
| Goodwill | 979,855 | | | 1,269,133 | | |
| Accumulated impairment losses | (592,752) | | | (592,752) | | |
| ¥ | 387,103 | | | ¥ | 676,381 | | |
Notes:
(1)Goodwill originally recognized of ¥1,900,019 million, which has been fully impaired before April 1, 2023, is not included in the table above.
(2)Goodwill acquired during the six months ended September 30, 2024, relates to the acquisition of business in the Asset Management & Investor Services Business Group, including the acquisition of MPMS (See Note 2).
Other Intangible Assets
The table below presents the net carrying amount by major class of other intangible assets at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | |
| March 31,
2024
(As Adjusted) | | September 30,
2024 |
| (in millions) |
| Intangible assets subject to amortization: | | | |
| Software | ¥ | 927,893 | | | ¥ | 982,042 | |
| Customer relationships | 265,082 | | | 318,264 | |
| Core deposit intangibles | 43,741 | | | 41,614 | |
| Trade names | 38,621 | | | 38,935 | |
| Other | 14,245 | | | 14,404 | |
| Total | 1,289,582 | | | 1,395,259 | |
| Intangible assets not subject to amortization: | | | |
| Other | 8,178 | | | 7,898 | |
| Total | ¥ | 1,297,760 | | | ¥ | 1,403,157 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
6. LEASE TRANSACTIONS
Lease transactions as a lessor
As part of its financing activities, the MUFG Group enters into leasing arrangements with customers. The MUFG Group’s leasing operations are conducted through leasing subsidiaries and consist principally of various types of data processing equipment, office equipment and transportation equipment. Sales type and direct financing leases are presented in loans. In certain cases, the MUFG Group requests lessees to deposit an amount nearly, or equal to, the residual value of leased assets.
The following table presents profit or loss of lease transactions as a lessor for the six months ended September 30, 2023 and September 30, 2024:
| | | | | | | | | | | |
| September 30,
2023
(As Adjusted) | | September 30,
2024 |
| (in millions) |
| Sales type and direct financing leases: | | | |
| Finance income on net investment | ¥ | 70,426 | | | ¥ | 73,163 | |
| Operating leases: | | | |
| Lease income | 3,938 | | | 5,085 | |
| Total | ¥ | 74,364 | | | ¥ | 78,248 | |
Finance income on net investment is included in Interest income—Loans, including fees in the condensed consolidated statements of income. Lease income from operating lease transactions is included in Other non-interest income in the condensed consolidated statements of income.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
7. PLEDGED ASSETS AND COLLATERAL
At September 30, 2024, assets mortgaged, pledged, or otherwise subject to lien were as follows:
| | | | | |
| September 30, 2024 |
| (in millions) |
| Trading account securities | ¥ | 10,245,563 | |
| Investment securities | 13,369,390 | |
| Loans | 18,334,549 | |
| Other | 27,678 | |
| Total | ¥ | 41,977,180 | |
The above pledged assets were classified by type of liabilities to which they related as follows:
| | | | | |
| September 30, 2024 |
| (in millions) |
| Deposits | ¥ | 15,226 | |
| Payables under repurchase agreements and securities lending transactions | 20,207,187 | |
| Other short-term borrowings and long-term debt | 21,700,084 | |
| Other | 54,683 | |
| Total | ¥ | 41,977,180 | |
At September 30, 2024, certain investment securities, principally Japanese national government and Japanese government agency bonds, loans and other assets with a combined carrying value of ¥21,928,287 million were pledged for acting as a collection agent of public funds, for settlement of exchange at the Bank of Japan and Japanese Banks’ Payment Clearing Network, for derivative transactions and for certain other purposes.
The MUFG Group engages in on-balance sheet securitizations. These securitizations of mortgage and apartment loans, which do not qualify for sales treatment, are accounted for as secured borrowings. The amount of loans in the table above represents the carrying amount of these transactions with the carrying amount of the associated liabilities included in Other short-term borrowings and Long-term debt.
At March 31, 2024 (As Adjusted) and September 30, 2024, the cash collateral pledged for derivative transactions, which is included in Other assets, was ¥3,182,590 million and ¥2,600,708 million, respectively, and the cash collateral received for derivative transactions, which is included in Other liabilities, was ¥1,404,066 million and ¥1,346,651 million, respectively.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
8. SEVERANCE INDEMNITIES AND PENSION PLANS
The following table summarizes the components of net periodic benefit costs of pension benefits, severance indemnities plans (“SIPs”) and other benefits for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, |
| Domestic subsidiaries | | Foreign offices and subsidiaries |
| 2023 | | 2024 | | 2023 | | 2024 |
| Pension benefits and SIPs | | Pension benefits and SIPs | | Pension benefits （As Adjusted） | | Other benefits | | Pension benefits | | Other benefits |
| (in millions) |
| Service cost—benefits earned during the period | ¥ | 17,788 | | | ¥ | 16,104 | | | ¥ | 6,191 | | | ¥ | 30 | | | ¥ | 7,731 | | | ¥ | 47 | |
| Interest cost on projected benefit obligation | 10,288 | | | 12,041 | | | 4,367 | | | 594 | | | 4,423 | | | 643 | |
| Expected return on plan assets | (41,218) | | | (48,224) | | | (5,574) | | | (732) | | | (6,202) | | | (835) | |
| Amortization of net actuarial loss (gain) | 925 | | | (9,002) | | | 837 | | | 584 | | | 276 | | | 61 | |
| Amortization of prior service cost | (973) | | | (355) | | | (430) | | | (208) | | | (416) | | | (225) | |
| Loss (gain) on settlements and curtailment | (6,393) | | | (7,683) | | | 974 | | | — | | | — | | | — | |
| Other | — | | | (110) | | | — | | | — | | | (956) | | | (301) | |
| Net periodic benefit cost (income) | ¥ | (19,583) | | | ¥ | (37,229) | | | ¥ | 6,365 | | | ¥ | 268 | | | ¥ | 4,856 | | | ¥ | (610) | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
9. OFFSETTING OF DERIVATIVES, REPURCHASE AGREEMENTS, AND SECURITIES LENDING TRANSACTIONS
The following tables present, as of March 31, 2024 and September 30, 2024, the gross and net amounts of the derivatives, resale and repurchase agreements, and securities borrowing and lending transactions, including the related gross amounts subject to an enforceable master netting arrangement or similar agreement not offset in the condensed consolidated balance sheets. The MUFG Group primarily enters into International Swaps and Derivatives Association master netting agreements, master repurchase agreements and master securities lending agreements or similar agreements for derivative contracts, resale and repurchase agreements, and securities borrowing and lending transactions. In the event of default on or termination of any one contract, these agreements provide the contracting parties with the right to net a counterparty’s rights and obligations and to liquidate and set off collateral against any net amount owed by the counterparty. Generally, as the MUFG Group has elected to present such amounts on a gross basis, the amounts subject to these agreements are included in “Gross amounts not offset in the condensed consolidated balance sheet” column in the tabular disclosure below. For certain transactions where a legal opinion with respect to the enforceability of netting has not been sought or obtained, the related amounts are not subject to enforceable master netting agreements and not included in “Gross amounts not offset in the condensed consolidated balance sheet” column in the tabular disclosure below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross
amounts of
recognized
assets/liabilities | | Gross amounts offset in the condensed consolidated balance sheet | | Net amounts presented in the condensed consolidated balance sheet | | Gross amounts not offset in the condensed consolidated balance sheet | | Net amounts |
| At March 31, 2024 (As Adjusted): | | | Financial instruments | | Cash collateral received/pledged | |
| (in billions) |
| Financial assets: | | | | | | | | | | | |
| Derivative assets | ¥ | 15,351 | | | ¥ | — | | | ¥ | 15,351 | | | ¥ | (12,155) | | | ¥ | (1,095) | | | ¥ | 2,101 | |
| Receivables under resale agreements | 20,906 | | | (2,082) | | | 18,824 | | | (17,532) | | | (9) | | | 1,283 | |
| Receivables under securities borrowing transactions | 5,076 | | | (75) | | | 5,001 | | | (4,652) | | | — | | | 349 | |
| Total | ¥ | 41,333 | | | ¥ | (2,157) | | | ¥ | 39,176 | | | ¥ | (34,339) | | | ¥ | (1,104) | | | ¥ | 3,733 | |
| Financial liabilities: | | | | | | | | | | | |
| Derivative liabilities | ¥ | 16,360 | | | ¥ | — | | | ¥ | 16,360 | | | ¥ | (11,625) | | | ¥ | (2,154) | | | ¥ | 2,581 | |
| Payables under repurchase agreements | 37,771 | | | (2,081) | | | 35,690 | | | (34,188) | | | (82) | | | 1,420 | |
| Payables under securities lending transactions | 1,092 | | | (75) | | | 1,017 | | | (992) | | | (10) | | | 15 | |
| Obligations to return securities received as collateral | 7,223 | | | — | | | 7,223 | | | (1,766) | | | — | | | 5,457 | |
| Total | ¥ | 62,446 | | | ¥ | (2,156) | | | ¥ | 60,290 | | | ¥ | (48,571) | | | ¥ | (2,246) | | | ¥ | 9,473 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross
amounts of
recognized
assets/liabilities | | Gross amounts offset in the condensed consolidated balance sheet | | Net amounts presented in the condensed consolidated balance sheet | | Gross amounts not offset in the condensed consolidated balance sheet | | Net amounts |
| At September 30, 2024: | | | Financial instruments | | Cash collateral received/pledged | |
| (in billions) |
| Financial assets: | | | | | | | | | | | |
| Derivative assets | ¥ | 16,382 | | | ¥ | — | | | ¥ | 16,382 | | | ¥ | (12,964) | | | ¥ | (1,018) | | | ¥ | 2,400 | |
| Receivables under resale agreements | 20,981 | | | (2,567) | | | 18,414 | | | (17,382) | | | (10) | | | 1,022 | |
| Receivables under securities borrowing transactions | 5,553 | | | (18) | | | 5,535 | | | (5,048) | | | — | | | 487 | |
| Total | ¥ | 42,916 | | | ¥ | (2,585) | | | ¥ | 40,331 | | | ¥ | (35,394) | | | ¥ | (1,028) | | | ¥ | 3,909 | |
| Financial liabilities: | | | | | | | | | | | |
| Derivative liabilities | ¥ | 16,637 | | | ¥ | — | | | ¥ | 16,637 | | | ¥ | (12,616) | | | ¥ | (1,361) | | | ¥ | 2,660 | |
| Payables under repurchase agreements | 40,289 | | | (2,565) | | | 37,724 | | | (35,949) | | | (64) | | | 1,711 | |
| Payables under securities lending transactions | 662 | | | (18) | | | 644 | | | (626) | | | (3) | | | 15 | |
| Obligations to return securities received as collateral | 6,335 | | | — | | | 6,335 | | | (1,342) | | | — | | | 4,993 | |
| Total | ¥ | 63,923 | | | ¥ | (2,583) | | | ¥ | 61,340 | | | ¥ | (50,533) | | | ¥ | (1,428) | | | ¥ | 9,379 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
10. REPURCHASE AGREEMENTS AND SECURITIES LENDING TRANSACTIONS ACCOUNTED FOR AS SECURED BORROWINGS
The following tables present gross obligations for payables under repurchase agreements, payables under securities lending transactions and obligations to return securities received as collateral by remaining contractual maturity and class of collateral pledged at March 31, 2024 and September 30, 2024. Potential risks associated with these arrangements primarily relate to market and liquidity risks. To manage risks associated with market exposure, the MUFG Group generally revalues the collateral underlying its repurchase agreements and securities lending transactions on a daily basis and monitors the value of the underlying securities, consisting of primarily high-quality securities such as Japanese national government and Japanese government agency bonds, and foreign government and official institution bonds. In the event the market value of such securities falls below the related agreements at contract amounts plus accrued interest, the MUFG Group may be required to deposit additional collateral when appropriate. To address liquidity risks, the MUFG Group conducts stress tests to ensure the adequate level of liquidity is maintained in the event of a decline in the fair value of any collateral pledged.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) |
| Remaining Contractual Maturity |
| Overnight and open | | 30 days or less | | 31-90 days | | Over 90 days | | Total |
| (in billions) |
| Payables under repurchase agreements | ¥ | 8,846 | | | ¥ | 20,010 | | | ¥ | 7,209 | | | ¥ | 1,706 | | | ¥ | 37,771 | |
| Payables under securities lending transactions | 1,015 | | | 1 | | | — | | | 76 | | | 1,092 | |
| Obligations to return securities received as collateral | 6,076 | | | 610 | | | 135 | | | 402 | | | 7,223 | |
| Total | ¥ | 15,937 | | | ¥ | 20,621 | | | ¥ | 7,344 | | | ¥ | 2,184 | | | ¥ | 46,086 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2024 |
| Remaining Contractual Maturity |
| Overnight and open | | 30 days or less | | 31-90 days | | Over 90 days | | Total |
| (in billions) |
| Payables under repurchase agreements | ¥ | 14,561 | | | ¥ | 18,317 | | | ¥ | 3,370 | | | ¥ | 4,041 | | | ¥ | 40,289 | |
| Payables under securities lending transactions | 644 | | | — | | | — | | | 18 | | | 662 | |
| Obligations to return securities received as collateral | 5,869 | | | 85 | | | 98 | | | 283 | | | 6,335 | |
| Total | ¥ | 21,074 | | | ¥ | 18,402 | | | ¥ | 3,468 | | | ¥ | 4,342 | | | ¥ | 47,286 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Secured borrowing by the class of collateral pledged at March 31, 2024 and September 30, 2024 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2024
(As Adjusted) |
| Payables under repurchase agreements | | Payables under securities lending transactions | | Obligations to return securities received as collateral | | Total |
| (in billions) |
| Japanese national government and Japanese government agency bonds | ¥ | 13,001 | | | ¥ | 359 | | | ¥ | 4,229 | | | ¥ | 17,589 | |
| Foreign government and official institution bonds | 14,172 | | | — | | | 1,033 | | | 15,205 | |
| Corporate bonds | 773 | | | 76 | | | 400 | | | 1,249 | |
| Residential mortgage-backed securities | 8,819 | | | — | | | — | | | 8,819 | |
| Other debt securities | 346 | | | — | | | 38 | | | 384 | |
| Marketable equity securities | 636 | | | 657 | | | 1,523 | | | 2,816 | |
| Other | 24 | | | — | | | — | | | 24 | |
| Total | ¥ | 37,771 | | | ¥ | 1,092 | | | ¥ | 7,223 | | | ¥ | 46,086 | |
| |
| September 30, 2024 |
| Payables under repurchase agreements | | Payables under securities lending transactions | | Obligations to return securities received as collateral | | Total |
| (in billions) |
| Japanese national government and Japanese government agency bonds | ¥ | 12,783 | | | ¥ | 162 | | | ¥ | 3,404 | | | ¥ | 16,349 | |
| Foreign government and official institution bonds | 19,866 | | | 36 | | | 1,353 | | | 21,255 | |
| Corporate bonds | 978 | | | — | | | 352 | | | 1,330 | |
| Residential mortgage-backed securities | 5,212 | | | — | | | — | | | 5,212 | |
| Other debt securities | 212 | | | — | | | 24 | | | 236 | |
| Marketable equity securities | 756 | | | 464 | | | 1,202 | | | 2,422 | |
| Other | 482 | | | — | | | — | | | 482 | |
| Total | ¥ | 40,289 | | | ¥ | 662 | | | ¥ | 6,335 | | | ¥ | 47,286 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
11. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the changes in Accumulated other comprehensive income (“Accumulated OCI”), net of tax and net of noncontrolling interests, for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | |
| Six months ended
September 30, |
| 2023
(As Adjusted) | | 2024 |
| (in millions) |
| Accumulated other comprehensive income, net of taxes: | | | |
| Net unrealized losses on investment securities: | | | |
| Balance at beginning of period | ¥ | (883,931) | | | ¥ | (826,271) | |
| Net change during the period | (158,006) | | | 41,091 | |
| Balance at end of period | ¥ | (1,041,937) | | | ¥ | (785,180) | |
| Net debt valuation adjustments: | | | |
| Balance at beginning of period | ¥ | 3,268 | | | ¥ | (41,382) | |
| Net change during the period | (22,260) | | | 3,051 | |
| Balance at end of period | ¥ | (18,992) | | | ¥ | (38,331) | |
| Net unrealized gains on derivatives qualifying for cash flow hedges: | | | |
| Balance at beginning of period | ¥ | 551 | | | ¥ | 63 | |
| Net change during the period | 1,078 | | | 178 | |
| Balance at end of period | ¥ | 1,629 | | | ¥ | 241 | |
| Defined benefit plans: | | | |
| Balance at beginning of period | ¥ | 8,350 | | | ¥ | 389,392 | |
| Net change during the period | 48,942 | | | (23,831) | |
| Balance at end of period | ¥ | 57,292 | | | ¥ | 365,561 | |
| Foreign currency translation adjustments: | | | |
| Balance at beginning of period | ¥ | 1,742,816 | | | ¥ | 2,715,823 | |
| Net change during the period | 951,063 | | | 222,763 | |
| Balance at end of period | ¥ | 2,693,879 | | | ¥ | 2,938,586 | |
| Balance at end of period | ¥ | 1,691,871 | | | ¥ | 2,480,877 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The following table presents the before tax and net of tax changes in each component of Accumulated OCI for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended September 30, |
| 2023
(As Adjusted) | | 2024 |
| Before tax | | Tax (expense) or benefit | | Net of tax | | Before tax | | Tax (expense) or benefit | | Net of tax |
| (in millions) |
| Net unrealized gains (losses) on investment securities: | | | | | | | | | | | |
| Net unrealized gains (losses) on investment securities | ¥ | (148,170) | | | ¥ | 23,379 | | | ¥ | (124,791) | | | ¥ | 58,792 | | | ¥ | 13,182 | | | ¥ | 71,974 | |
| Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | (51,965) | | | 14,020 | | | (37,945) | | | 10,142 | | | (3,467) | | | 6,675 | |
| Net change | (200,135) | | | 37,399 | | | (162,736) | | | 68,934 | | | 9,715 | | | 78,649 | |
| Net unrealized gains (losses) on investment securities attributable to noncontrolling interests | | | | | (4,730) | | | | | | | 37,558 | |
| Net unrealized gains (losses) on investment securities attributable to Mitsubishi UFJ Financial Group | | | | | (158,006) | | | | | | | 41,091 | |
| Net debt valuation adjustments: | | | | | | | | | | | |
| Net debt valuation adjustments | (32,387) | | | 9,917 | | | (22,470) | | | 3,950 | | | (1,210) | | | 2,740 | |
| Reclassification adjustment for losses included in net income before attribution of noncontrolling interests | 302 | | | (92) | | | 210 | | | 448 | | | (137) | | | 311 | |
| Net change | (32,085) | | | 9,825 | | | (22,260) | | | 4,398 | | | (1,347) | | | 3,051 | |
| Net debt valuation adjustments attributable to noncontrolling interests | | | | | — | | | | | | | — | |
| Net debt valuation adjustments attributable to Mitsubishi UFJ Financial Group | | | | | (22,260) | | | | | | | 3,051 | |
| Net unrealized gains (losses) on derivatives qualifying for cash flow hedges: | | | | | | | | | | | |
| Net unrealized gains (losses) on derivatives qualifying for cash flow hedges | 8,324 | | | (1,674) | | | 6,650 | | | (8,998) | | | 1,796 | | | (7,202) | |
| Reclassification adjustment for losses (gains) included in net income before attribution of noncontrolling interests | (6,552) | | | 1,306 | | | (5,246) | | | 9,292 | | | (1,858) | | | 7,434 | |
| Net change | 1,772 | | | (368) | | | 1,404 | | | 294 | | | (62) | | | 232 | |
| Net unrealized gains on derivatives qualifying for cash flow hedges attributable to noncontrolling interests | | | | | 326 | | | | | | | 54 | |
| Net unrealized gains on derivatives qualifying for cash flow hedges attributable to Mitsubishi UFJ Financial Group | | | | | 1,078 | | | | | | | 178 | |
| Defined benefit plans: | | | | | | | | | | | |
| Defined benefit plans | 75,061 | | | (23,003) | | | 52,058 | | | (16,030) | | | 3,867 | | | (12,163) | |
| Reclassification adjustment for gains included in net income before attribution of noncontrolling interests | (4,606) | | | 1,532 | | | (3,074) | | | (17,210) | | | 5,274 | | | (11,936) | |
| Net change | 70,455 | | | (21,471) | | | 48,984 | | | (33,240) | | | 9,141 | | | (24,099) | |
| Defined benefit plans attributable to noncontrolling interests | | | | | 42 | | | | | | | (268) | |
| Defined benefit plans attributable to Mitsubishi UFJ Financial Group | | | | | 48,942 | | | | | | | (23,831) | |
| Foreign currency translation adjustments: | | | | | | | | | | | |
| Foreign currency translation adjustments | 1,172,869 | | | (146,399) | | | 1,026,470 | | | 219,251 | | | 71,910 | | | 291,161 | |
| Reclassification adjustment for gains included in net income before attribution of noncontrolling interests | (4,231) | | | 1,296 | | | (2,935) | | | (6,824) | | | 2,181 | | | (4,643) | |
| Net change | 1,168,638 | | | (145,103) | | | 1,023,535 | | | 212,427 | | | 74,091 | | | 286,518 | |
| Foreign currency translation adjustments attributable to noncontrolling interests | | | | | 72,472 | | | | | | | 63,755 | |
| Foreign currency translation adjustments attributable to Mitsubishi UFJ Financial Group | | | | | 951,063 | | | | | | | 222,763 | |
| Other comprehensive income attributable to Mitsubishi UFJ Financial Group | | | | | ¥ | 820,817 | | | | | | | ¥ | 243,252 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The following table presents the effect of the reclassification of significant items out of Accumulated OCI on the respective line items of the accompanying condensed consolidated statements of income for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | | | | | | | |
| | Six months ended
September 30, | | |
| | 2023
(As Adjusted) | | 2024 | | |
| Details of Accumulated OCI components | | Amount reclassified out of Accumulated OCI | | Line items in the consolidated statements of income |
| | (in millions) | | |
| Net unrealized losses (gains) on investment securities | | | | | | |
| Net gains on sales and redemptions of Available-for-sale debt securities | | ¥ | (52,655) | | | ¥ | (2,687) | | | Investment securities gains (losses)—net |
| Impairment losses on investment securities | | 2 | | | 12,798 | | | Investment securities gains (losses)—net |
| Other | | 688 | | | 31 | | | |
| | (51,965) | | | 10,142 | | | Total before tax |
| | 14,020 | | | (3,467) | | | Income tax expense |
| | ¥ | (37,945) | | | ¥ | 6,675 | | | Net of tax |
| Net debt valuation adjustments | | ¥ | 302 | | | ¥ | 448 | | | Equity in earnings of equity method investees—net |
| | 302 | | | 448 | | | Total before tax |
| | (92) | | | (137) | | | Income tax expense |
| | ¥ | 210 | | | ¥ | 311 | | | Net of tax |
| Net unrealized losses (gains) on derivatives qualifying for cash flow hedges | | | | | | |
| | | | | | |
| Foreign exchange contracts | | (6,552) | | | 9,292 | | | Interest expense on Long-term debt or Foreign exchange gains (losses)—net |
| | | | | | |
| | (6,552) | | | 9,292 | | | Total before tax |
| | 1,306 | | | (1,858) | | | Income tax expense |
| | ¥ | (5,246) | | | ¥ | 7,434 | | | Net of tax |
| Defined benefit plans | | | | | | |
Net actuarial loss (gain)(1) | | ¥ | 2,346 | | | ¥ | (8,665) | | | Other non-interest expenses |
Prior service cost(1) | | (1,610) | | | (996) | | | Other non-interest expenses |
Gain on settlements and curtailment, and other(1) | | (5,342) | | | (7,549) | | | Other non-interest expenses |
| | (4,606) | | | (17,210) | | | Total before tax |
| | 1,532 | | | 5,274 | | | Income tax expense |
| | ¥ | (3,074) | | | ¥ | (11,936) | | | Net of tax |
| Foreign currency translation adjustments | | ¥ | (4,231) | | | ¥ | (6,824) | | | Other non-interest income |
| | | | | | |
| | (4,231) | | | (6,824) | | | Total before tax |
| | 1,296 | | | 2,181 | | | Income tax expense |
| | ¥ | (2,935) | | | ¥ | (4,643) | | | Net of tax |
| Total reclassifications for the period | | ¥ | (67,052) | | | ¥ | (4,152) | | | Total before tax |
| | 18,062 | | | 1,993 | | | Income tax expense |
| | ¥ | (48,990) | | | ¥ | (2,159) | | | Net of tax |
Note:
(1)These Accumulated OCI components are components of net periodic benefit cost. See Note 8 for more information.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
12. DERIVATIVE FINANCIAL INSTRUMENTS
The MUFG Group uses various derivative financial instruments both for trading purposes and for purposes other than trading (primarily risk management purposes) in the normal course of business to meet the financial needs of its customers, as a source of revenue and to manage its exposures to a variety of risks. See Note 23 to the consolidated financial statements for the fiscal year ended March 31, 2024 for a further discussion of the MUFG Group’s use of derivative instruments. During the six months ended September 30, 2024, there was no change in the MUFG Group’s use of derivative instruments that had a material impact on the MUFG Group’s financial position and results of operations.
Notional Amounts of Derivative Contracts
The following table summarizes the notional amounts of derivative contracts at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | |
| Notional amounts(1) |
| March 31,
2024
(As Adjusted) | | September 30, 2024 |
| (in trillions) |
| Interest rate contracts | ¥ | 1,812.8 | | | ¥ | 2,010.0 | |
| Foreign exchange contracts | 340.7 | | | 338.1 | |
| Equity contracts | 5.0 | | | 5.0 | |
| Commodity contracts | 0.2 | | | 0.2 | |
| Credit derivatives | 5.3 | | | 5.6 | |
| Other | 3.6 | | | 3.6 | |
| Total | ¥ | 2,167.6 | | | ¥ | 2,362.5 | |
Note:
(1)Includes both written and purchased positions.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Impact of Derivatives on the Condensed Consolidated Balance Sheets
The following table summarizes fair value information on derivative instruments that are recorded on the MUFG Group’s condensed consolidated balance sheets at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair value of derivative instruments |
| | March 31, 2024(1)(5) (As Adjusted) | | September 30, 2024(1)(5) |
| | Not designated as hedges(2) | | Designated as hedges(3) | | Total derivatives(4) | | Not designated as hedges(2) | | Designated as hedges(3) | | Total derivatives(4) |
| | (in billions) |
| Derivative assets: | | | | | | | | | | | |
| Interest rate contracts | ¥ | 9,505 | | | ¥ | — | | | ¥ | 9,505 | | | ¥ | 10,410 | | | ¥ | — | | | ¥ | 10,410 | |
| Foreign exchange contracts | 5,647 | | | 10 | | | 5,657 | | | 5,760 | | | 3 | | | 5,763 | |
| Equity contracts | 123 | | | — | | | 123 | | | 103 | | | — | | | 103 | |
| Commodity contracts | 19 | | | — | | | 19 | | | 20 | | | — | | | 20 | |
| Credit derivatives | 47 | | | — | | | 47 | | | 59 | | | — | | | 59 | |
Other(6) | — | | | — | | | — | | | 27 | | | — | | | 27 | |
| Total derivative assets | ¥ | 15,341 | | | ¥ | 10 | | | ¥ | 15,351 | | | ¥ | 16,379 | | | ¥ | 3 | | | ¥ | 16,382 | |
| Derivative liabilities: | | | | | | | | | | | |
| Interest rate contracts | ¥ | 10,696 | | | ¥ | — | | | ¥ | 10,696 | | | ¥ | 11,277 | | | ¥ | — | | | ¥ | 11,277 | |
| Foreign exchange contracts | 5,536 | | | — | | | 5,536 | | | 5,278 | | | 4 | | | 5,282 | |
| Equity contracts | 158 | | | — | | | 158 | | | 122 | | | — | | | 122 | |
| Commodity contracts | 18 | | | — | | | 18 | | | 19 | | | — | | | 19 | |
| Credit derivatives | 62 | | | — | | | 62 | | | 55 | | | — | | | 55 | |
Other(6) | (110) | | | — | | | (110) | | | (118) | | | — | | | (118) | |
| Total derivative liabilities | ¥ | 16,360 | | | ¥ | — | | | ¥ | 16,360 | | | ¥ | 16,633 | | | ¥ | 4 | | | ¥ | 16,637 | |
Notes:
(1)The fair value of derivative instruments is presented on a gross basis even when derivative instruments are subject to master netting agreements. Cash collateral payable and receivable associated with derivative instruments are not added to or netted against the fair value amounts.
(2)Except for the derivative instruments described in (6), the derivative instruments which are not designated as a hedging instrument are held for trading and risk management purposes and are presented in Trading account assets and liabilities.
(3)The MUFG Group adopts hedging strategies and applies hedge accounting to certain derivative transactions entered into by certain subsidiaries. The derivative instruments which are designated as hedging instruments are presented in Other assets or Other liabilities on the accompanying condensed consolidated balance sheets.
(4)This table does not include contracts with embedded derivatives for which the fair value option has been elected.
(5)For more information about fair value measurement and assumptions used to measure the fair value of derivatives, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
(6)Other mainly includes bifurcated embedded derivatives carried at fair value, which are presented in Loans, Deposits and Long-term debt.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Impact of Derivatives on the Condensed Consolidated Statements of Income
The following table provides more detailed information regarding the derivative-related impact on the accompanying condensed consolidated statements of income for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | | | | | | | |
| Trading and risk management derivatives gains and losses (Not designated as hedging instruments) |
| Foreign exchange gains (losses)—net | | Trading account profits (losses)—net | | Total |
| (in billions) |
| Six months ended September 30, 2023 (As Adjusted): | | | | | |
| Interest rate contracts | ¥ | — | | | ¥ | (223) | | | ¥ | (223) | |
| Foreign exchange contracts | (380) | | | — | | | (380) | |
| Equity contracts | — | | | (268) | | | (268) | |
| Credit derivatives | — | | | (20) | | | (20) | |
Other(1) | (8) | | | (32) | | | (40) | |
| Total | ¥ | (388) | | | ¥ | (543) | | | ¥ | (931) | |
| Six months ended September 30, 2024: | | | | | |
| Interest rate contracts | ¥ | — | | | ¥ | (103) | | | ¥ | (103) | |
| Foreign exchange contracts | 258 | | | — | | | 258 | |
| Equity contracts | — | | | 215 | | | 215 | |
| Credit derivatives | — | | | 2 | | | 2 | |
Other(1) | 23 | | | (10) | | | 13 | |
| Total | ¥ | 281 | | | ¥ | 104 | | | ¥ | 385 | |
Note:
(1)Other mainly includes bifurcated embedded derivatives carried at fair value, which are presented in Loans, Deposits and Long-term debt.
Credit Derivatives
The MUFG Group enters into credit derivatives to manage its credit risk exposure, to facilitate client transactions, and for proprietary trading purposes, under which they provide the counterparty protection against the risk of default on a set of debt obligations issued by a specified reference entity or entities. See Note 23 to the consolidated financial statements for the fiscal year ended March 31, 2024 for a more detailed explanation and discussion of credit derivatives.
The table below summarizes certain information regarding protection sold through credit derivatives as of March 31, 2024 and September 30, 2024:
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Protection sold |
| Maximum potential/Notional amount by expiration period | | Fair value |
| At March 31, 2024: | 1 year or less | | 1-5 years | | Over 5 years | | Total | | (Asset)/ Liability(1) |
| (in millions) |
| Single name credit default swaps: | | | | | | | | | |
Investment grade(2) | ¥ | 212,513 | | | ¥ | 736,935 | | | ¥ | 219,642 | | | ¥ | 1,169,090 | | | ¥ | (17,199) | |
| Non-investment grade | 82,749 | | | 146,029 | | | 15,837 | | | 244,615 | | | 211 | |
| Total | 295,262 | | | 882,964 | | | 235,479 | | | 1,413,705 | | | (16,988) | |
| Index and basket credit default swaps : | | | | | | | | | |
Investment grade(2) | 73,300 | | | 681,443 | | | 10,202 | | | 764,945 | | | (11,458) | |
| Non-investment grade | — | | | — | | | — | | | — | | | — | |
| Not rated | 2,836 | | | 24,623 | | | 3,404 | | | 30,863 | | | (548) | |
| Total | 76,136 | | | 706,066 | | | 13,606 | | | 795,808 | | | (12,006) | |
| Total credit default swaps sold | ¥ | 371,398 | | | ¥ | 1,589,030 | | | ¥ | 249,085 | | | ¥ | 2,209,513 | | | ¥ | (28,994) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Protection sold |
| Maximum potential/Notional amount by expiration period | | Fair value |
| At September 30, 2024: | 1 year or less | | 1-5 years | | Over 5 years | | Total | | (Asset)/ Liability(1) |
| (in millions) |
| Single name credit default swaps: | | | | | | | | | |
Investment grade(2) | ¥ | 205,198 | | | ¥ | 776,859 | | | ¥ | 190,509 | | | ¥ | 1,172,566 | | | ¥ | (17,819) | |
| Non-investment grade | 37,040 | | | 128,223 | | | 9,431 | | | 174,694 | | | 103 | |
| Total | 242,238 | | | 905,082 | | | 199,940 | | | 1,347,260 | | | (17,716) | |
| Index and basket credit default swaps : | | | | | | | | | |
Investment grade(2) | 42,300 | | | 769,496 | | | 9,864 | | | 821,660 | | | (9,993) | |
| Non-investment grade | — | | | 57,092 | | | — | | | 57,092 | | | (802) | |
| Not rated | — | | | 126,043 | | | 3,864 | | | 129,907 | | | (2,553) | |
| Total | 42,300 | | | 952,631 | | | 13,728 | | | 1,008,659 | | | (13,348) | |
| Total credit default swaps sold | ¥ | 284,538 | | | ¥ | 1,857,713 | | | ¥ | 213,668 | | | ¥ | 2,355,919 | | | ¥ | (31,064) | |
Notes:
(1)Fair value amounts are shown on a gross basis prior to cash collateral or counterparty netting.
(2)The MUFG Group considers ratings of Baa3/BBB- or higher to meet the definition of investment grade.
The MUFG Group may economically hedge its exposure to credit derivatives by entering into offsetting derivative contracts. The carrying value and notional amounts of credit protection sold in which the MUFG Group held purchased protection with identical underlying referenced entities were approximately ¥25 billion and ¥1,920 billion, respectively, at March 31, 2024, and approximately ¥27 billion and ¥2,079 billion, respectively, at September 30, 2024.
Collateral is held by the MUFG Group in relation to these instruments. Collateral requirements are determined at the counterparty level and cover numerous transactions and products as opposed to individual contracts.
Credit Risk, Liquidity Risk and Credit-risk-related Contingent Features
Certain derivative instruments held by the MUFG Group contain provisions that require the MUFG Group’s debt to maintain an investment grade credit rating from each of the major credit rating agencies. If the MUFG Group’s debt were to fall below investment grade, it would be in violation of these provisions, and the counterparties to the derivative instruments could request payments on early termination or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position at March 31, 2024 and September 30, 2024 was approximately ¥0.8 trillion and ¥0.7 trillion, respectively, for which the MUFG Group
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
has posted collateral of approximately ¥274 billion and ¥221 billion, respectively, in the normal course of business. The amount of additional collateral and early termination amount which could be requested if the MUFG Group’s debt falls below investment grade was ¥67 billion and ¥129 billion, respectively, as of March 31, 2024 and ¥44 billion and ¥122 billion, respectively, as of September 30, 2024.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
13. OBLIGATIONS UNDER GUARANTEES AND OTHER OFF-BALANCE SHEET INSTRUMENTS
Obligations under Guarantees
The MUFG Group provides customers with a variety of guarantees and similar arrangements as described in Note 24 to the consolidated financial statements for the fiscal year ended March 31, 2024. The table below presents the contractual or notional amounts of such guarantees at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | |
| March 31,
2024 | | September 30, 2024 |
| (As Adjusted) | | |
| (in billions) |
| Standby letters of credit and financial guarantees | ¥ | 5,320 | | | ¥ | 5,259 | |
| Performance guarantees | 4,788 | | | 4,606 | |
Derivative instruments(1)(2) | 51,058 | | | 54,154 | |
| Liabilities of trust accounts | 19,938 | | | 19,365 | |
| Other | 40 | | | 25 | |
| Total | ¥ | 81,144 | | | ¥ | 83,409 | |
Notes:
(1)Credit derivatives sold by the MUFG Group are excluded from this presentation.
(2)Derivative instruments that are deemed to be included within the definition of guarantees as prescribed in the guidance on guarantees include certain written options and credit default swaps.
Performance Risk
The MUFG Group monitors performance risk of its guarantees using the same credit rating system utilized for estimating probabilities of default with its loan portfolio. The MUFG Group’s credit rating system is consistent with both the method of evaluating credit risk under Basel III and those of third-party credit rating agencies. On certain underlying referenced credits or entities, ratings are not available. Such referenced credits are included in the “Not rated” category in the following tables.
Presented in the tables below is the maximum potential amount of future payments classified based upon internal credit ratings as of March 31, 2024 and September 30, 2024. The determination of the maximum potential future payments is based on the notional amount of the guarantees without consideration of possible recoveries under recourse provisions or from collateral held or pledged. Such amounts do not represent the anticipated losses, if any, on these guarantees.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2024: | Maximum potential/ Contractual or Notional amount | | Amount by borrower grade |
| Normal | | Close Watch(1) | | Likely to become Bankrupt or Legally/ Virtually Bankrupt(1) | | Not rated |
| (As Adjusted) | (in billions) |
| Standby letters of credit and financial guarantees | ¥ | 5,320 | | | ¥ | 5,161 | | | ¥ | 123 | | | ¥ | 18 | | | ¥ | 18 | |
| Performance guarantees | 4,788 | | | 4,685 | | | 45 | | | 29 | | | 29 | |
| Total | ¥ | 10,108 | | | ¥ | 9,846 | | | ¥ | 168 | | | ¥ | 47 | | | ¥ | 47 | |
| | |
| At September 30, 2024: | Maximum potential/ Contractual or Notional amount | | Amount by borrower grade |
| Normal | | Close Watch(1) | | Likely to become Bankrupt or Legally/ Virtually Bankrupt(1) | | Not rated |
| | (in billions) |
| Standby letters of credit and financial guarantees | ¥ | 5,259 | | | ¥ | 5,121 | | | ¥ | 119 | | | ¥ | 12 | | | ¥ | 7 | |
| Performance guarantees | 4,606 | | | 4,502 | | | 45 | | | 23 | | | 36 | |
| Total | ¥ | 9,865 | | | ¥ | 9,623 | | | ¥ | 164 | | | ¥ | 35 | | | ¥ | 43 | |
Note:
(1)See Notes of the tables regarding “the maximum potential amount of future payments classified based upon internal credit ratings” in Note 24 to the consolidated financial statements for the fiscal year ended March 31, 2024.
The guarantees that the MUFG Group does not classify based upon internal credit ratings are described in Note 24 to the consolidated financial statements for the fiscal year ended March 31, 2024.
Other Off-balance Sheet Instruments
In addition to obligations under guarantees and similar arrangements set forth above, the MUFG Group issues other off-balance sheet instruments to meet the financial needs of its customers and for other purposes as described in Note 24 to the consolidated financial statements for the fiscal year ended March 31, 2024. The table below presents the contractual amounts with regard to such instruments at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | |
| March 31,
2024 | | September 30, 2024 |
| (As Adjusted) | | |
| (in billions) |
| Commitments to extend credit | ¥ | 94,414 | | | ¥ | 94,819 | |
| Commercial letters of credit | 974 | | | 861 | |
| Commitments to make investments | 674 | | | 720 | |
| | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
14. CONTINGENT LIABILITIES
Repayment of Excess Interest
The MUFG Group maintains an allowance for repayment of excess interest based on an analysis of past experience of reimbursement of excess interest, borrowers’ profile, recent trend of borrowers’ claims for reimbursement, and management future forecasts. Management believes that the provision for repayment of excess interest is adequate and the allowance is at the appropriate amount to absorb probable losses, so that the impact of future claims for reimbursement of excess interest will not have a material adverse effect on the MUFG Group’s financial position and results of operations. The allowance for repayment of excess interest established by MUFG’s consumer finance subsidiaries, which was included in Other liabilities, was ¥7,073 million and ¥3,664 million as of March 31, 2024 and September 30, 2024, respectively. Provision (reversal) related to the allowance for the six months ended September 30, 2023 and 2024 were not material.
Litigation
In the ordinary course of business, the MUFG Group is subject to various litigation and regulatory matters. In accordance with applicable accounting guidance, the MUFG Group establishes an accrued liability for loss contingencies arising from litigation and regulatory matters when they are determined to be probable in their occurrence and the probable loss amount can be reasonably estimated. Based upon current knowledge and consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters, where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material adverse effect on the MUFG Group’s financial position, results of operations or cash flows. Additionally, management believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to the MUFG Group’s financial position, results of operations or cash flows.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
15. VARIABLE INTEREST ENTITIES
In the normal course of business, the MUFG Group has financial interests and other contractual obligations in various entities which may be deemed to be VIEs such as asset-backed conduits, various investment funds, special purpose entities created for structured financing, repackaged instruments, entities created for the securitization of the MUFG Group’s assets, and trust arrangements.
See Note 25 to the consolidated financial statements for the fiscal year ended March 31, 2024 for further information about the MUFG Group’s involvements with VIEs.
The following tables present the assets and liabilities of consolidated VIEs recorded on the accompanying condensed consolidated balance sheets at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated VIEs | Consolidated assets |
| At March 31, 2024 (As Adjusted): | Total | | Cash and due from banks | | Interest-earning deposits in other banks | | Trading account assets | | Investment securities | | Loans | | All other assets |
| (in millions) |
| Asset-backed conduits | ¥ | 8,186,919 | | | ¥ | 66,761 | | | ¥ | 33,826 | | | ¥ | 45,689 | | | ¥ | 860,760 | | | ¥ | 7,045,964 | | | ¥ | 133,919 | |
| Investment funds | 1,662,843 | | | 1,759 | | | 30,748 | | | 337,619 | | | 77,334 | | | — | | | 1,215,383 | |
| Special purpose entities created for structured financing | 248,049 | | | — | | | 3,820 | | | — | | | — | | | 143,688 | | | 100,541 | |
| Repackaged instruments | 296,435 | | | 9,892 | | | — | | | 137,795 | | | 132,951 | | | 15,000 | | | 797 | |
| Securitization of the MUFG Group’s assets | 10,447,956 | | | — | | | 1,664 | | | — | | | — | | | 10,428,225 | | | 18,067 | |
| Trust arrangements | 5,352,775 | | | — | | | — | | | 803,348 | | | 1,811,498 | | | 2,737,908 | | | 21 | |
| Other | 85,008 | | | 470 | | | 5,366 | | | 14,059 | | | 38,219 | | | 2,481 | | | 24,413 | |
| Total consolidated assets before elimination | 26,279,985 | | | 78,882 | | | 75,424 | | | 1,338,510 | | | 2,920,762 | | | 20,373,266 | | | 1,493,141 | |
| The amounts eliminated in consolidation | (3,671,326) | | | (68,736) | | | (41,258) | | | (72,217) | | | (600,219) | | | (2,859,135) | | | (29,761) | |
| Total consolidated assets | ¥ | 22,608,659 | | | ¥ | 10,146 | | | ¥ | 34,166 | | | ¥ | 1,266,293 | | | ¥ | 2,320,543 | | | ¥ | 17,514,131 | | | ¥ | 1,463,380 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated liabilities |
| Total | | Deposits | | Other short-term borrowings | | Long-term debt | | All other liabilities |
| (in millions) |
| Asset-backed conduits | ¥ | 8,162,014 | | | ¥ | — | | | ¥ | 6,331,278 | | | ¥ | 1,371,157 | | | ¥ | 459,579 | |
| Investment funds | 1,147,832 | | | — | | | 1,136,495 | | | 8,772 | | | 2,565 | |
| Special purpose entities created for structured financing | 136,230 | | | — | | | — | | | 117,947 | | | 18,283 | |
| Repackaged instruments | 301,045 | | | — | | | — | | | 287,192 | | | 13,853 | |
| Securitization of the MUFG Group’s assets | 10,460,439 | | | — | | | — | | | 10,454,694 | | | 5,745 | |
| Trust arrangements | 5,352,880 | | | 3,292,449 | | | 1,131,120 | | | — | | | 929,311 | |
| Other | 78,350 | | | — | | | 966 | | | 54,159 | | | 23,225 | |
| Total consolidated liabilities before elimination | 25,638,790 | | | 3,292,449 | | | 8,599,859 | | | 12,293,921 | | | 1,452,561 | |
| The amounts eliminated in consolidation | (16,806,678) | | | (432) | | | (4,242,371) | | | (11,888,346) | | | (675,529) | |
| The amount of liabilities with recourse to the general credit of the MUFG Group | (8,275,821) | | | (3,292,017) | | | (4,311,280) | | | (26,558) | | | (645,966) | |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of the MUFG Group | ¥ | 556,291 | | | ¥ | — | | | ¥ | 46,208 | | | ¥ | 379,017 | | | ¥ | 131,066 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated VIEs | Consolidated assets |
| At September 30, 2024: | Total | | Cash and due from banks | | Interest-earning deposits in other banks | | Trading account assets | | Investment securities | | Loans | | All other
assets |
| | (in millions) |
| Asset-backed conduits | ¥ | 7,837,476 | | | ¥ | 59,653 | | | ¥ | 9,056 | | | ¥ | 30,660 | | | ¥ | 1,066,793 | | | ¥ | 6,635,495 | | | ¥ | 35,819 | |
| Investment funds | 1,931,625 | | | 3,627 | | | 77,762 | | | 316,919 | | | 82,111 | | | — | | | 1,451,206 | |
| Special purpose entities created for structured financing | 264,271 | | | — | | | 7,299 | | | — | | | — | | | 161,314 | | | 95,658 | |
| Repackaged instruments | 299,749 | | | 5,267 | | | — | | | 134,983 | | | 142,925 | | | 15,000 | | | 1,574 | |
| Securitization of the MUFG Group’s assets | 9,973,885 | | | — | | | 571 | | | — | | | — | | | 9,957,585 | | | 15,729 | |
| Trust arrangements | 3,881,900 | | | — | | | — | | | 818,856 | | | 1,760,368 | | | 1,302,675 | | | 1 | |
| Other | 238,122 | | | 489 | | | 4,148 | | | 6,023 | | | 38,737 | | | 4,269 | | | 184,456 | |
| Total consolidated assets before elimination | 24,427,028 | | | 69,036 | | | 98,836 | | | 1,307,441 | | | 3,090,934 | | | 18,076,338 | | | 1,784,443 | |
| The amounts eliminated in consolidation | (2,337,750) | | | (63,432) | | | (36,142) | | | (35,724) | | | (600,084) | | | (1,436,388) | | | (165,980) | |
| Total consolidated assets | ¥ | 22,089,278 | | | ¥ | 5,604 | | | ¥ | 62,694 | | | ¥ | 1,271,717 | | | ¥ | 2,490,850 | | | ¥ | 16,639,950 | | | ¥ | 1,618,463 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Consolidated liabilities |
| | Total | | Deposits | | Other short-term borrowings | | Long-term debt | | All other
liabilities |
| | (in millions) |
| Asset-backed conduits | ¥ | 7,863,659 | | | ¥ | — | | | ¥ | 5,909,982 | | | ¥ | 1,438,850 | | | ¥ | 514,827 | |
| Investment funds | 1,401,945 | | | — | | | 1,389,280 | | | 8,944 | | | 3,721 | |
| Special purpose entities created for structured financing | 143,924 | | | — | | | — | | | 132,986 | | | 10,938 | |
| Repackaged instruments | 281,658 | | | — | | | — | | | 234,474 | | | 47,184 | |
| Securitization of the MUFG Group’s assets | 9,986,252 | | | — | | | — | | | 9,982,854 | | | 3,398 | |
| Trust arrangements | 3,882,061 | | | 1,884,244 | | | 1,086,986 | | | — | | | 910,831 | |
| Other | 311,764 | | | — | | | 807 | | | 278,751 | | | 32,206 | |
| Total consolidated liabilities before elimination | 23,871,263 | | | 1,884,244 | | | 8,387,055 | | | 12,076,859 | | | 1,523,105 | |
| The amounts eliminated in consolidation | (16,627,232) | | | (369) | | | (4,279,490) | | | (11,630,196) | | | (717,177) | |
| The amount of liabilities with recourse to the general credit of the MUFG Group | (6,627,312) | | | (1,883,875) | | | (4,066,740) | | | (6,247) | | | (670,450) | |
| Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of the MUFG Group | ¥ | 616,719 | | | ¥ | — | | | ¥ | 40,825 | | | ¥ | 440,416 | | | ¥ | 135,478 | |
In general, the creditors or beneficial interest holders of consolidated VIEs have recourse not only to the assets of those VIEs of which they are creditors or beneficial interest holders, but also to other assets of the MUFG Group, since the MUFG Group is also contractually required to provide credit enhancement or program-wide liquidity to these VIEs.
The following tables present the total assets of non-consolidated VIEs, the maximum exposure to loss resulting from the MUFG Group’s involvement with non-consolidated VIEs, and the assets and liabilities which relate to the MUFG’s variable interests in non-consolidated VIEs at March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-consolidated VIEs | | On-balance sheet assets | | On-balance sheet liabilities |
| At March 31, 2024 (As Adjusted): | Total assets | | Maximum exposure | | Total | | Trading account assets | | Investment securities | | Loans | | All other assets | | Total | | All other liabilities |
| (in millions) |
| Asset-backed conduits | ¥ | 39,009,182 | | | ¥ | 9,223,412 | | | ¥ | 7,284,351 | | | ¥ | 13,184 | | | ¥ | 2,147,351 | | | ¥ | 5,123,816 | | | ¥ | — | | | ¥ | 3,860 | | | ¥ | 3,860 | |
| Investment funds | 140,717,674 | | | 7,385,746 | | | 4,757,037 | | | 321,000 | | | 300,803 | | | 3,719,748 | | | 415,486 | | | 16,172 | | | 16,172 | |
| Special purpose entities created for structured financing | 72,102,436 | | | 7,696,582 | | | 5,334,476 | | | 93,808 | | | 61,114 | | | 5,134,236 | | | 45,318 | | | 251,944 | | | 251,944 | |
| Repackaged instruments | 10,205,539 | | | 5,144,654 | | | 5,004,762 | | | 1,683,889 | | | 2,592,589 | | | 497,156 | | | 231,128 | | | — | | | — | |
| Other | 96,343,162 | | | 4,594,025 | | | 3,234,286 | | | 261,745 | | | — | | | 2,871,454 | | | 101,087 | | | 17,651 | | | 17,651 | |
| Total | ¥ | 358,377,993 | | | ¥ | 34,044,419 | | | ¥ | 25,614,912 | | | ¥ | 2,373,626 | | | ¥ | 5,101,857 | | | ¥ | 17,346,410 | | | ¥ | 793,019 | | | ¥ | 289,627 | | | ¥ | 289,627 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-consolidated VIEs | | On-balance sheet assets | | On-balance sheet liabilities |
| At September 30, 2024: | Total assets | | Maximum exposure | | Total | | Trading account assets | | Investment securities | | Loans | | All other
assets | | Total | | All other liabilities |
| (in millions) |
| Asset-backed conduits | ¥ | 29,789,964 | | | ¥ | 8,667,183 | | | ¥ | 6,681,352 | | | ¥ | 29,401 | | | ¥ | 2,157,031 | | | ¥ | 4,494,920 | | | ¥ | — | | | ¥ | 982 | | | ¥ | 982 | |
| Investment funds | 107,184,083 | | | 7,026,974 | | | 4,568,235 | | | 386,996 | | | 211,183 | | | 3,738,255 | | | 231,801 | | | 12,116 | | | 12,116 | |
| Special purpose entities created for structured financing | 71,035,055 | | | 7,415,470 | | | 5,068,653 | | | 102,641 | | | 59,518 | | | 4,840,457 | | | 66,037 | | | 211,236 | | | 211,236 | |
| Repackaged instruments | 8,231,091 | | | 4,300,776 | | | 4,212,759 | | | 1,741,380 | | | 1,801,704 | | | 466,149 | | | 203,526 | | | 89 | | | 89 | |
| Other | 98,123,684 | | | 4,512,729 | | | 3,214,095 | | | 309,771 | | | — | | | 2,785,355 | | | 118,969 | | | 22,687 | | | 22,687 | |
| Total | ¥ | 314,363,877 | | | ¥ | 31,923,132 | | | ¥ | 23,745,094 | | | ¥ | 2,570,189 | | | ¥ | 4,229,436 | | | ¥ | 16,325,136 | | | ¥ | 620,333 | | | ¥ | 247,110 | | | ¥ | 247,110 | |
Maximum exposure to loss on each type of entity is determined based on the carrying amount of any on-balance sheet assets and any off-balance sheet liabilities held, net of any recourse liabilities. Therefore, the maximum exposure to loss represents the maximum loss the MUFG Group could possibly incur at each balance sheet date and does not reflect the likelihood of such a loss being incurred. The difference between the amount of on-balance sheet assets and the maximum exposure to loss primarily comprises the remaining undrawn commitments.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
16. FEES AND COMMISSIONS INCOME
Disaggregation of Contract Revenue
Details of fees and commissions income for the six months ended September 30, 2023 and 2024 are as follows:
| | | | | | | | | | | |
| 2023
(As Adjusted) | | 2024 |
| (in millions) |
| Fees and commissions on deposits | ¥ | 18,277 | | | ¥ | 18,418 | |
| Fees and commissions on remittances and transfers | 73,481 | | | 78,435 | |
| Fees and commissions on foreign trading business | 36,905 | | | 42,601 | |
| Fees and commissions on credit card business | 120,202 | | | 128,463 | |
| Fees and commissions on security-related services | 133,126 | | | 169,960 | |
| Fees and commissions on administration and management services for investment funds | 150,700 | | | 162,524 | |
| Trust fees | 62,724 | | | 69,501 | |
Guarantee fees(1) | 25,270 | | | 26,663 | |
| Insurance commissions | 29,934 | | | 38,107 | |
| Fees and commissions on real estate business | 22,347 | | | 28,190 | |
Other fees and commissions(2) | 213,264 | | | 250,166 | |
| Total | ¥ | 886,230 | | | ¥ | 1,013,028 | |
Notes:
(1)Guarantee fees are not within the scope of the guidance on revenue from contracts with customers.
(2)Other fees and commissions include non-refundable financing related fees that are not within the scope of the guidance on revenue from contracts with customers.
The following is an explanation of the relationship with revenue information disclosed for each reportable segment.
These revenues from contracts with customers are related to various reportable segments disclosed in Note 17. The business segment information is derived from the internal management reporting system used by management to measure the performance of the MUFG Group’s business segments. In addition, the business segment information is primarily based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Further, the format and information as disclosed in Note 17 are not consistent with the accompanying condensed consolidated financial statements prepared on the basis of U.S. GAAP. For example, management does not use information on segments’ gross revenue to allocate resources and assess performance.
The majority of fees and commissions on deposits are attributable to Retail & Digital Business Group (“R&D”) and Global Commercial Banking Business Group (“GCB”) with no significant concentration in any particular segments.
The business activities relevant to fees and commissions on remittances and transfers are attributable to R&D, Commercial Banking & Wealth Management Business Group (“CWM”), Japanese Corporate Investment Banking Business Group (“JCIB”) and Global Corporate Investment Banking Business Group (“GCIB”) with no significant concentration in any particular segments.
The business activities relevant to fees and commissions on foreign trading business are attributable to R&D, CWM, JCIB and GCIB with no significant concentration in any particular segments.
The business activities relevant to fees and commissions on credit card business are substantially attributable to R&D and GCB with no significant concentration in any particular segments.
The majority of fees and commissions on security-related services are from the business activities relevant to R&D, CWM, with JCIB and GCIB providing a smaller impact.
The business activities relevant to fees and commissions on administration and management services for investment funds are substantially attributable to Asset Management & Investor Service Business Group (“AM/IS”).
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The business activities relevant to trust fees are attributable to AM/IS.
The majority of insurance commissions are from the business activities relevant to R&D, CWM, and GCB with no significant concentration in any particular segments.
The business activities relevant to fees and commissions on real estate business are attributable to CWM and JCIB with no significant concentration in any particular segments.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
17. BUSINESS SEGMENTS
The reportable segments of the MUFG Group are subject to the periodical review by the Executive Committee, which represents the MUFG Group’s chief operating decision maker, to determine the allocation of management resources and assess performance. The MUFG Group has established its business units according to the characteristics of customers and the nature of the underlying business. Each business unit engages in business activities based on comprehensive strategies developed for and aimed at respective targeted customers and businesses. The business segment information is primarily based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices. Accordingly, the format and information are not consistent with the accompanying condensed consolidated financial statements prepared on the basis of U.S. GAAP. A reconciliation is provided for the total amounts of segments’ operating profit with income before income tax expense under U.S. GAAP. The MUFG Group does not use information on the segments’ total assets to allocate its resources and assess performance. Accordingly, business segment information on total assets is not presented. However, in order to ensure more efficient management of resources, and to strengthen controls on profits and losses in each business group, the MUFG Group allocate fixed assets of both MUFG Bank on a stand-alone basis and Mitsubishi UFJ Trust and Banking on a stand-alone basis to each business unit. Accordingly, such fixed assets allocated to business groups are presented below.
The MUFG Group integrated the operations of its consolidated subsidiaries into seven business segments—Retail & Digital, Commercial Banking & Wealth Management, Japanese Corporate & Investment Banking, Global Commercial Banking, Asset Management & Investor Services, Global Corporate & Investment Banking, and Global Markets.
The following is a brief explanation of the MUFG Group’s business segments:
Retail & Digital Business Group—Covers the businesses of Mitsubishi UFJ NICOS, other consumer finance companies, and MUFG Bank with individual customers (excluding wealth management customers) and corporate customers in Japan through the three channels under the concept of “Real (Face-to-Face) × Remote × Digital”.
Commercial Banking & Wealth Management Business Group—Covers small and medium sized enterprise clients and wealth management clients in Japan, offering an extensive array of commercial banking, trust banking and securities products and services.
Japanese Corporate & Investment Banking Business Group—Covers the large Japanese corporate businesses. This business group offers large Japanese corporations advanced financial solutions designed to respond to their diversified and globalized needs and to contribute to their business and financial strategies through the global network of the MUFG group companies.
Global Commercial Banking Business Group—Covers the retail and commercial banking businesses of Krungsri and Bank Danamon. This business group offers a comprehensive array of financial products and services such as loans, deposits, fund transfers, investments and asset management services for local retail, small and medium-sized enterprise, and corporate customers across the Asia-Pacific region.
Asset Management & Investor Services Business Group—Covers the asset management and asset administration businesses of Mitsubishi UFJ Trust and Banking, MUFG Bank and First Sentier Investors. By integrating the trust banking expertise of Mitsubishi UFJ Trust and Banking and the global strengths of MUFG Bank, the business group offers a full range of asset management and administration services for corporations and pension funds, including pension fund management and administration, advice on pension structures, and payments to beneficiaries, and also offers investment trusts for retail customers.
Global Corporate & Investment Banking Business Group—Covers the global corporate, investment and transaction banking businesses of MUFG Bank and Mitsubishi UFJ Securities Holdings. Through a global network of offices and branches, this business group provides large non-Japanese corporate and financial institution customers outside Japan with a comprehensive set of solutions that meet their increasingly diverse and sophisticated financing needs.
Global Markets Business Group—Covers the customer business and the treasury operations of MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Securities Holdings. The customer business includes sales and trading in fixed income instruments, currencies, equities and other investment products as well as origination and distribution of financial products. The treasury operations include asset and liability management as well as global investments for the MUFG Group.
Other—Consists mainly of the corporate centers of MUFG, MUFG Bank, Mitsubishi UFJ Trust and Banking and Mitsubishi UFJ Morgan Stanley Securities. The elimination of duplicated amounts of net revenues among business segments is also reflected in Other.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The MUFG Group made modifications to its internal management accounting rules and practices, effective April 1, 2024, including reorganizing the Digital Service Business Group and Retail & Commercial Banking Business Group into the Retail & Digital Business Group and the Commercial Banking & Wealth Management Business Group and changing the internal accounting rules for headquarters and other overhead expenses.
These modifications had the following impact on its previously reported business segment information for the six months ended September 30, 2023:
• reducing the operating loss of Other and increasing the operating profits of the Global Commercial Banking Business Group by ¥84.6 billion and ¥0.2 billion, respectively;
• reducing the operating profits of the Global Corporate & Investment Banking Business Group, the Japanese Corporate &
Investment Banking Business Group, the Retail & Digital Business Group, the Commercial Banking & Wealth Management Business Group, the Global Markets Business Group and the Asset Management & Investor Services Business Group by ¥39.4 billion, ¥20.7 billion, ¥17.4 billion, ¥6.7 billion, ¥4.3 billion and ¥1.9 billion, respectively;
• increasing the fixed assets, the increase in fixed assets and the depreciation of the Retail & Digital Business Group by ¥58.6 billion, ¥6.0 billion, and ¥4.3 billion, of the Japanese Corporate & Investment Banking Business Group by ¥2.5 billion, ¥0.3 billion and ¥0.2 billion, respectively, and of the Global Markets Business Group by ¥2.5 billion, ¥0.2 billion and ¥0.1 billion, as well as increasing the fixed assets of the Global Corporate & Investment Banking Business Group by ¥0.8 billion and of the Global Commercial Banking Business Group by ¥0.2 billion, respectively; and
• reducing the fixed assets, the increase in fixed assets and the depreciation of the Commercial Banking & Wealth Management Business Group by ¥40.7 billion, ¥3.9 billion and ¥2.9 billion, respectively, and of Other by ¥23.9 billion, ¥2.6 billion and ¥1.7 billion, respectively.
Prior period business segment information has been restated to enable comparison between the relevant amounts for the six months ended September 30, 2023 and 2024.
Starting from the fiscal year ending March 31, 2025, the fiscal year of Krungsri an entity includes in the Global Commercial Banking Business Group, has been changed from the previous January to December period to an April to March period for consolidation purposes. Given the treatment of reporting lag changes under Japanese GAAP, there is no retrospective application of the change. In connection with this change, the segment amounts prepared in accordance with Japanese GAAP for the six-month period ended September 30, 2024, reflect Krungsri's relevant amounts for the nine months ended September 30, 2024. For a discussion of the treatment of reporting lag changes under U.S. GAAP, see Note 1.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Customer Business | | | | | | |
| Retail & Digital Business Group | |
Commercial Banking & Wealth Management Business Group | | Japanese
Corporate &
Investment
Banking
Business
Group | | Global
Commercial
Banking
Business
Group | | Asset
Management
& Investor
Services
Business
Group | | Global
Corporate &
Investment
Banking
Business
Group | | Total | | Global
Markets
Business
Group | | Other | | Total |
| (in billions) |
| Six months ended September 30, 2023: | | | | | | | | | | | | | | | | | | | |
| Net revenue: | ¥ | 409.3 | | | ¥ | 283.6 | | | ¥ | 455.9 | | | ¥ | 310.8 | | | ¥ | 205.7 | | | ¥ | 409.0 | | | ¥ | 2,074.3 | | | ¥ | 376.5 | | | ¥ | 44.6 | | | ¥ | 2,495.4 | |
BK and TB(1): | 155.7 | | | 189.5 | | | 371.7 | | | 19.5 | | | 56.8 | | | 367.3 | | | 1,160.5 | | | 226.5 | | | 122.8 | | | 1,509.8 | |
| Net interest income | 123.8 | | | 93.7 | | | 230.9 | | | 19.1 | | | 6.5 | | | 186.7 | | | 660.7 | | | 97.3 | | | 128.5 | | | 886.5 | |
| Net fees | 30.2 | | | 78.7 | | | 104.7 | | | — | | | 50.3 | | | 163.1 | | | 427.0 | | | (8.5) | | | (9.7) | | | 408.8 | |
| Other | 1.7 | | | 17.1 | | | 36.1 | | | 0.4 | | | — | | | 17.5 | | | 72.8 | | | 137.7 | | | 4.0 | | | 214.5 | |
| Other than BK and TB | 253.6 | | | 94.1 | | | 84.2 | | | 291.3 | | | 148.9 | | | 41.7 | | | 913.8 | | | 150.0 | | | (78.2) | | | 985.6 | |
| Operating expenses | 310.7 | | | 202.3 | | | 182.2 | | | 174.6 | | | 147.6 | | | 204.1 | | | 1,221.5 | | | 149.0 | | | 52.6 | | | 1,423.1 | |
| Operating profit (loss) | ¥ | 98.6 | | | ¥ | 81.3 | | | ¥ | 273.7 | | | ¥ | 136.2 | | | ¥ | 58.1 | | | ¥ | 204.9 | | | ¥ | 852.8 | | | ¥ | 227.5 | | | ¥ | (8.0) | | | ¥ | 1,072.3 | |
Fixed assets(2) | ¥ | 231.4 | | | ¥ | 170.3 | | | ¥ | 163.5 | | | ¥ | 1.5 | | | ¥ | 22.1 | | | ¥ | 169.2 | | | ¥ | 758.0 | | | ¥ | 110.9 | | | ¥ | 508.0 | | | ¥ | 1,376.9 | |
Increase in fixed assets(3) | ¥ | 25.1 | | | ¥ | 16.9 | | | ¥ | 22.6 | | | ¥ | 0.2 | | | ¥ | 7.3 | | | ¥ | 15.9 | | | ¥ | 88.0 | | | ¥ | 13.3 | | | ¥ | 12.7 | | | ¥ | 114.0 | |
Depreciation(3) | ¥ | 11.3 | | | ¥ | 9.1 | | | ¥ | 21.4 | | | ¥ | 0.1 | | | ¥ | 4.0 | | | ¥ | 21.8 | | | ¥ | 67.7 | | | ¥ | 15.6 | | | ¥ | 6.9 | | | ¥ | 90.2 | |
| Six months ended September 30, 2024: | | | | | | | | | | | | | | | | | | | |
| Net revenue: | ¥ | 457.1 | | | ¥ | 339.1 | | | ¥ | 502.9 | | | ¥ | 577.3 | | | ¥ | 244.4 | | | ¥ | 433.1 | | | ¥ | 2,553.9 | | | ¥ | 361.2 | | | ¥ | (10.3) | | | ¥ | 2,904.8 | |
BK and TB(1): | 190.3 | | | 227.7 | | | 405.9 | | | 19.8 | | | 67.7 | | | 383.1 | | | 1,294.5 | | | 227.4 | | | 41.1 | | | 1,563.0 | |
| Net interest income | 149.3 | | | 122.2 | | | 253.1 | | | 19.8 | | | 12.6 | | | 206.7 | | | 763.7 | | | 56.9 | | | 84.6 | | | 905.2 | |
| Net fees | 39.3 | | | 85.4 | | | 119.0 | | | — | | | 55.0 | | | 161.3 | | | 460.0 | | | (12.0) | | | (13.7) | | | 434.3 | |
| Other | 1.7 | | | 20.1 | | | 33.8 | | | — | | | 0.1 | | | 15.1 | | | 70.8 | | | 182.5 | | | (29.8) | | | 223.5 | |
| Other than BK and TB | 266.8 | | | 111.4 | | | 97.0 | | | 557.5 | | | 176.7 | | | 50.0 | | | 1,259.4 | | | 133.8 | | | (51.4) | | | 1,341.8 | |
| Operating expenses | 328.4 | | | 210.8 | | | 188.3 | | | 302.2 | | | 175.5 | | | 208.4 | | | 1,413.6 | | | 158.7 | | | 38.0 | | | 1,610.3 | |
| Operating profit (loss) | ¥ | 128.7 | | | ¥ | 128.3 | | | ¥ | 314.6 | | | ¥ | 275.1 | | | ¥ | 68.9 | | | ¥ | 224.7 | | | ¥ | 1,140.3 | | | ¥ | 202.5 | | | ¥ | (48.3) | | | ¥ | 1,294.5 | |
Fixed assets(2) | ¥ | 250.7 | | | ¥ | 179.7 | | | ¥ | 165.5 | | | ¥ | 1.8 | | | ¥ | 21.3 | | | ¥ | 158.2 | | | ¥ | 777.2 | | | ¥ | 95.3 | | | ¥ | 492.7 | | | ¥ | 1,365.2 | |
Increase in fixed assets(3) | ¥ | 22.5 | | | ¥ | 17.3 | | | ¥ | 20.5 | | | ¥ | 0.3 | | | ¥ | 4.0 | | | ¥ | 10.6 | | | ¥ | 75.2 | | | ¥ | 10.7 | | | ¥ | 12.0 | | | ¥ | 97.9 | |
Depreciation(3) | ¥ | 15.9 | | | ¥ | 10.2 | | | ¥ | 20.4 | | | ¥ | 0.1 | | | ¥ | 3.9 | | | ¥ | 17.8 | | | ¥ | 68.3 | | | ¥ | 15.4 | | | ¥ | 6.5 | | | ¥ | 90.2 | |
Notes:
(1)“BK and TB” is a sum of MUFG Bank on a stand-alone basis (BK) and Mitsubishi UFJ Trust and Banking on a stand-alone basis (TB).
(2)Fixed assets in the above table are based on the financial information prepared in accordance with Japanese GAAP as adjusted in accordance with internal management accounting rules and practices, and the amounts correspond to premises and equipment-net, intangible assets-net and goodwill of BK and TB. Fixed assets of MUFG and other consolidated subsidiaries and Japanese GAAP consolidation adjustments amounting to ¥1,344.5 billion as of September 30, 2023 and ¥1,820.3 billion as of September 30, 2024, respectively, are not allocated to each business segment when determining the allocation of management resources and assessing performance and, therefore, such amounts are not included in the table above.
(3)These amounts are related to the fixed assets of BK and TB included in the table above.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Reconciliation
As set forth above, the measurement basis and the income and expense items of the internal management reporting system are different from the accompanying condensed consolidated statements of income. Therefore, it is impracticable to present reconciliations of all of the business segments’ information, other than operating profit, to corresponding items in the accompanying condensed consolidated statements of income.
A reconciliation of operating profit and fixed assets under the internal management reporting system for the six months ended September 30, 2023 and 2024 above to income before income tax expense shown in the accompanying condensed consolidated statements of income and the total amount of premises and equipment-net, intangible assets-net and goodwill are as follows:
Starting from the fiscal year ending March 31, 2025, the fiscal year of Krungsri has been changed from the previous January to December period to an April to March period for consolidation purposes. In connection with this change, the operating profit prepared in accordance with Japanese GAAP includes Krungsri's operating profit for nine months, while the income before income tax expense prepared in accordance with U.S. GAAP includes Krungsri's income before income tax expense for six months. The adjustment for the difference between the two is included in Other – net.
| | | | | | | | | | | |
| Six months ended
September 30, |
| 2023
(As Adjusted) | | 2024 |
| (in billions) |
| Operating profit: | ¥ | 1,072 | | | ¥ | 1,295 | |
| Provision for credit losses | (72) | | | (129) | |
| Foreign exchange gains (losses)—net | (379) | | | 173 | |
| Trading account gains (losses)—net | (1,139) | | | 425 | |
| Equity investment securities gains (losses)—net | 625 | | | (493) | |
| Debt investment securities gains (losses)—net | 104 | | | (13) | |
| Equity in earnings of equity method investees—net | 215 | | | 316 | |
| | | |
| Reversal of off-balance sheet credit instruments | 4 | | | 1 | |
| | | |
| | | |
| Other—net | (141) | | | (231) | |
| Income before income tax expense | ¥ | 289 | | | ¥ | 1,344 | |
| Fixed assets: | ¥ | 1,377 | | | ¥ | 1,365 | |
| U.S. GAAP adjustments and other | 1,111 | | | 1,594 | |
| Premises and equipment-net, Intangible assets-net and Goodwill | ¥ | 2,488 | | | ¥ | 2,959 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
18. FAIR VALUE
For a discussion and explanation of the MUFG Group’s valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024. During the six months ended September 30, 2024, there were no changes to the MUFG Group’s valuation methodologies that had a material impact on the MUFG Group’s financial position and results of operations.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables present the financial instruments carried at fair value by level within the fair value hierarchy as of March 31, 2024 and September 30, 2024:
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2024
(As Adjusted) |
| | Level 1 | | Level 2 | | Level 3 | | Fair Value |
| | (in millions) |
| Assets | | | | | | | |
| Trading account assets: | | | | | | | |
Trading securities(1) | ¥ | 18,626,261 | | | ¥ | 13,463,967 | | | ¥ | 2,041,954 | | | ¥ | 34,132,182 | |
| Debt securities | | | | | | | |
| Japanese national government and Japanese government agency bonds | 6,278,228 | | | 395,745 | | | — | | | 6,673,973 | |
| Japanese prefectural and municipal bonds | — | | | 91,683 | | | — | | | 91,683 | |
| Foreign government and official institution bonds | 10,170,757 | | | 668,715 | | | 101 | | | 10,839,573 | |
| Corporate bonds | 8,937 | | | 2,723,957 | | | — | | | 2,732,894 | |
| Residential mortgage-backed securities | — | | | 5,422,286 | | | — | | | 5,422,286 | |
| Asset-backed securities | — | | | 1,374,191 | | | 1,352,755 | | | 2,726,946 | |
| Other debt securities | — | | | 2,599 | | | 536,846 | | | 539,445 | |
| Commercial paper | — | | | 1,609,441 | | | — | | | 1,609,441 | |
Equity securities(2) | 2,168,339 | | | 1,175,350 | | | 152,252 | | | 3,495,941 | |
| Trading derivative assets | 90,334 | | | 15,099,648 | | | 151,242 | | | 15,341,224 | |
| Interest rate contracts | 14,143 | | | 9,381,056 | | | 110,013 | | | 9,505,212 | |
| Foreign exchange contracts | 10,473 | | | 5,623,544 | | | 12,647 | | | 5,646,664 | |
| Equity contracts | 65,718 | | | 48,606 | | | 8,647 | | | 122,971 | |
| Commodity contracts | — | | | 391 | | | 18,282 | | | 18,673 | |
| Credit derivatives | — | | | 46,047 | | | 1,148 | | | 47,195 | |
Other(8) | — | | | 4 | | | 505 | | | 509 | |
Trading loans(3) | — | | | 31,542 | | | — | | | 31,542 | |
| Investment securities: | | | | | | | |
| Available-for-sale debt securities | 23,569,981 | | | 7,648,181 | | | 204,805 | | | 31,422,967 | |
| Japanese national government and Japanese government agency bonds | 21,336,860 | | | 1,830,540 | | | — | | | 23,167,400 | |
| Japanese prefectural and municipal bonds | — | | | 1,045,991 | | | — | | | 1,045,991 | |
| Foreign government and official institution bonds | 2,233,121 | | | 1,069,430 | | | — | | | 3,302,551 | |
| Corporate bonds | — | | | 1,021,296 | | | 5,172 | | | 1,026,468 | |
| Residential mortgage-backed securities | — | | | 1,229,510 | | | 15 | | | 1,229,525 | |
| Asset-backed securities | — | | | 1,114,195 | | | 132,951 | | | 1,247,146 | |
| Other debt securities | — | | | 337,219 | | | 66,667 | | | 403,886 | |
| Equity securities | 5,400,634 | | | 70,172 | | | 87,814 | | | 5,558,620 | |
| Marketable equity securities | 5,400,634 | | | 70,172 | | | — | | | 5,470,806 | |
Nonmarketable equity securities(4) | — | | | — | | | 87,814 | | | 87,814 | |
Other(5) | 1,175,125 | | | 1,229,942 | | | 139,120 | | | 2,544,187 | |
| Total | ¥ | 48,862,335 | | | ¥ | 37,543,452 | | | ¥ | 2,624,935 | | | ¥ | 89,030,722 | |
| | | | | | | |
| | | | | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2024
(As Adjusted) |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| (in millions) |
| Liabilities | | | | | | | |
| Trading account liabilities: | | | | | | | |
| Trading securities sold, not yet purchased | ¥ | 103,705 | | | ¥ | 4,508 | | | ¥ | — | | | ¥ | 108,213 | |
| Trading derivative liabilities | 117,567 | | | 16,261,406 | | | 92,336 | | | 16,471,309 | |
| Interest rate contracts | 30,997 | | | 10,594,827 | | | 70,527 | | | 10,696,351 | |
| Foreign exchange contracts | 954 | | | 5,532,241 | | | 2,449 | | | 5,535,644 | |
| Equity contracts | 85,616 | | | 72,337 | | | 389 | | | 158,342 | |
| Commodity contracts | — | | | — | | | 18,327 | | | 18,327 | |
| Credit derivatives | — | | | 61,999 | | | 488 | | | 62,487 | |
Other(8) | — | | | 2 | | | 156 | | | 158 | |
Obligation to return securities received as collateral(6) | 6,955,707 | | | 195,622 | | | 71,399 | | | 7,222,728 | |
Other(7) | — | | | 192,649 | | | 66,452 | | | 259,101 | |
| Total | ¥ | 7,176,979 | | | ¥ | 16,654,185 | | | ¥ | 230,187 | | | ¥ | 24,061,351 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| | At September 30, 2024 |
| | Level 1 | | Level 2 | | Level 3 | | Fair Value |
| | (in millions) |
| Assets | | | | | | | |
| Trading account assets: | | | | | | | |
Trading securities(1) | ¥ | 18,900,000 | | | ¥ | 16,352,138 | | | ¥ | 2,241,273 | | | ¥ | 37,493,411 | |
| Debt securities | | | | | | | |
| Japanese national government and Japanese government agency bonds | 5,946,162 | | | 462,070 | | | — | | | 6,408,232 | |
| Japanese prefectural and municipal bonds | — | | | 116,197 | | | — | | | 116,197 | |
| Foreign government and official institution bonds | 10,637,393 | | | 768,921 | | | — | | | 11,406,314 | |
| Corporate bonds | 3,958 | | | 2,724,574 | | | 112,867 | | | 2,841,399 | |
| Residential mortgage-backed securities | — | | | 7,973,417 | | | — | | | 7,973,417 | |
| Asset-backed securities | — | | | 1,315,776 | | | 1,462,122 | | | 2,777,898 | |
| Other debt securities | — | | | 36,299 | | | 528,173 | | | 564,472 | |
| Commercial paper | — | | | 1,888,753 | | | — | | | 1,888,753 | |
Equity securities(2) | 2,312,487 | | | 1,066,131 | | | 138,111 | | | 3,516,729 | |
| Trading derivative assets | 59,901 | | | 16,140,296 | | | 150,916 | | | 16,351,113 | |
| Interest rate contracts | 15,339 | | | 10,287,267 | | | 106,982 | | | 10,409,588 | |
| Foreign exchange contracts | 5,123 | | | 5,739,249 | | | 15,129 | | | 5,759,501 | |
| Equity contracts | 39,439 | | | 55,442 | | | 7,719 | | | 102,600 | |
| Commodity contracts | — | | | 534 | | | 19,299 | | | 19,833 | |
| Credit derivatives | — | | | 57,782 | | | 914 | | | 58,696 | |
Other(8) | — | | | 22 | | | 873 | | | 895 | |
Trading loans(3) | — | | | 38,834 | | | — | | | 38,834 | |
| Investment securities: | | | | | | | |
| Available-for-sale debt securities | 19,498,699 | | | 7,267,926 | | | 196,201 | | | 26,962,826 | |
| Japanese national government and Japanese government agency bonds | 17,220,733 | | | 1,419,509 | | | — | | | 18,640,242 | |
| Japanese prefectural and municipal bonds | — | | | 860,618 | | | — | | | 860,618 | |
| Foreign government and official institution bonds | 2,277,966 | | | 1,152,029 | | | — | | | 3,429,995 | |
| Corporate bonds | — | | | 937,409 | | | 4,614 | | | 942,023 | |
| Residential mortgage-backed securities | — | | | 1,173,742 | | | 15 | | | 1,173,757 | |
| Asset-backed securities | — | | | 1,269,731 | | | 142,924 | | | 1,412,655 | |
| Other debt securities | — | | | 454,888 | | | 48,648 | | | 503,536 | |
| Equity securities | 4,305,959 | | | 63,240 | | | 91,868 | | | 4,461,067 | |
Marketable equity securities(9) | 4,305,959 | | | 63,240 | | | — | | | 4,369,199 | |
Nonmarketable equity securities(4) | — | | | — | | | 91,868 | | | 91,868 | |
Other(5) | 820,022 | | | 1,585,037 | | | 130,030 | | | 2,535,089 | |
| Total | ¥ | 43,584,581 | | | ¥ | 41,447,471 | | | ¥ | 2,810,288 | | | ¥ | 87,842,340 | |
| | | | | | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| (in millions) |
| Liabilities | | | | | | | |
| Trading account liabilities: | | | | | | | |
| Trading securities sold, not yet purchased | ¥ | 88,055 | | | ¥ | 8,766 | | | ¥ | — | | | ¥ | 96,821 | |
| Trading derivative liabilities | 95,158 | | | 16,550,559 | | | 106,780 | | | 16,752,497 | |
| Interest rate contracts | 24,727 | | | 11,168,456 | | | 84,192 | | | 11,277,375 | |
| Foreign exchange contracts | 3,024 | | | 5,272,762 | | | 2,358 | | | 5,278,144 | |
| Equity contracts | 67,407 | | | 54,679 | | | 297 | | | 122,383 | |
| Commodity contracts | — | | | — | | | 19,329 | | | 19,329 | |
| Credit derivatives | — | | | 54,643 | | | 498 | | | 55,141 | |
Other(8) | — | | | 19 | | | 106 | | | 125 | |
Obligation to return securities received as collateral(6) | 5,971,347 | | | 309,829 | | | 53,827 | | | 6,335,003 | |
Other(7) | — | | | 424,438 | | | 53,251 | | | 477,689 | |
| Total | ¥ | 6,154,560 | | | ¥ | 17,293,592 | | | ¥ | 213,858 | | | ¥ | 23,662,010 | |
Notes:
(1)Includes securities measured under the fair value option.
(2)Excludes certain investments valued at net asset value of private equity funds whose fair values at March 31, 2024 were ¥264,458 million and those at September 30, 2024 were ¥265,182 million, respectively. The amounts of unfunded commitments related to these private equity funds at March 31, 2024 were ¥134,429 million, and those at September 30, 2024 were ¥215,142 million, respectively. For the nature and details of these investments, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
(3)Includes loans measured under the fair value option.
(4)Excludes certain investments valued at net asset value of real estate funds and private equity and other funds whose fair values at March 31, 2024 were ¥37,207 million and ¥53,324 million, respectively, and those at September 30, 2024 were ¥37,064 million and ¥55,666 million, respectively. The amounts of unfunded commitments related to these real estate funds and private equity and other funds at March 31, 2024 were ¥869 million and ¥250 million, respectively, and those at September 30, 2024 were nil and ¥250 million, respectively. For the nature and details of these investments, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
(5)Mainly comprises securities received as collateral that may be sold or repledged under securities lending transactions.
(6)Included in Other liabilities.
(7)Mainly includes other short-term borrowings, long-term debt and bifurcated embedded derivatives carried at fair value.
(8)Includes certain derivatives such as earthquake derivatives.
(9)Includes equity securities subject to contractual sale restrictions, with a total fair value of ¥14,902 million at September 30, 2024. The contractual restriction of these securities is a lock-up agreement, a market standoff agreement, or the result of a provision within a separate agreement between certain shareholders, and the range of remaining duration of these restrictions are 0.2 - 3.5 years. The market standoff agreements expire when the share price changes to a certain extent, and other agreements do not have specific clauses for a lapse in the restriction. See Note 1 for further information.
Changes in Level 3 Recurring Fair Value Measurements
The following tables present a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended September 30, 2023 and 2024. The determination to classify a financial instrument within Level 3 is based upon the significance of the unobservable inputs to overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 input, observable inputs (inputs that are actively quoted and can be validated to external sources). Accordingly, the gains and losses in the tables below include changes in fair value due in part to observable inputs used in the valuation techniques.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six month ended September 30, 2023 (As Adjusted): | | | Total gains (losses)
for the period | | | | | | | | | | | | | | | | Change in unrealized gains (losses) for assets and liabilities still held at September 30, 2023 | |
| | March 31, 2023 | | Included
in
earnings | | Included
in other
comprehensive
income | | Purchases | | Issues | | Sales | | Settlements | | Transfers
into
Level 3 | | Transfers
out of Level 3 | | September 30, 2023 | | |
| | (in millions) | |
| Assets | | | | | | | | | | | | | | | | | | | | | | |
| Trading account assets: | | | | | | | | | | | | | | | | | | | | | | |
Trading securities(1) | ¥ | 1,182,319 | | | ¥ | 149,674 | | (2) | ¥ | — | | | ¥ | 494,881 | | | ¥ | — | | | ¥ | (626) | | | ¥ | (9,895) | | | ¥ | 145 | | | ¥ | — | | | ¥ | 1,816,498 | | | ¥ | 148,307 | | (2) |
| Debt securities | | | | | | | | | | | | | | | | | | | | | | |
| Foreign government and official institution bonds | 1,168 | | | 122 | | | — | | | 7 | | | — | | | (7) | | | (1,140) | | | — | | | — | | | 150 | | | (1) | | |
| Asset-backed securities | 668,911 | | | 108,122 | | | — | | | 345,917 | | | — | | | — | | | (4,191) | | | — | | | — | | | 1,118,759 | | | 107,898 | | |
| Other debt securities | 334,124 | | | 42,225 | | | — | | | 141,000 | | | — | | | — | | | — | | | — | | | — | | | 517,349 | | | 42,225 | | |
| Equity securities | 178,116 | | | (795) | | | — | | | 7,957 | | | — | | | (619) | | | (4,564) | | | 145 | | | — | | | 180,240 | | | (1,815) | | |
| Trading derivatives—net | 81,096 | | | (12,416) | | (2) | 1,836 | | | 4 | | | (355) | | | — | | | (10,117) | | | 10,271 | | | (55,284) | | | 15,035 | | | (14,426) | | (2) |
| Interest rate contracts—net | 48,629 | | | (16,890) | | | (1,036) | | | — | | | — | | | — | | | 1,267 | | | 10,595 | | (5) | (53,445) | | (5) | (10,880) | | | (18,757) | | |
| Foreign exchange contracts—net | 11,345 | | | (2,797) | | | 999 | | | — | | | — | | | — | | | 417 | | | (324) | | | 59 | | | 9,699 | | | (2,220) | | |
| Equity contracts—net | 16,928 | | | 8,065 | | | 1,874 | | | 4 | | | — | | | — | | | (11,696) | | | — | | | (116) | | | 15,059 | | | 7,327 | | |
| Commodity contracts—net | 91 | | | (128) | | | (1) | | | — | | | — | | | — | | | (6) | | | — | | | — | | | (44) | | | (128) | | |
| Credit derivatives—net | 3,739 | | | (661) | | | — | | | — | | | — | | | — | | | (99) | | | — | | | (1,782) | | | 1,197 | | | (648) | | |
Other—net(8) | 364 | | | (5) | | | — | | | — | | | (355) | | | — | | | — | | | — | | | — | | | 4 | | | — | | |
| Investment securities: | | | | | | | | | | | | | | | | | | | | | | |
| Available-for-sale debt securities | 253,964 | | | 1,681 | | (3) | 20,605 | | | 205,826 | | | — | | | — | | | (140,321) | | | 26 | | | — | | | 341,781 | | | 18,340 | | (3) |
| Corporate bonds | 2,000 | | | (2) | | | 243 | | | — | | | — | | | — | | | (4) | | | 26 | | | — | | | 2,263 | | | 241 | | |
| Residential mortgage-backed securities | 15 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 15 | | | — | | |
| Asset-backed securities | 182,938 | | | 1,597 | | | 15,841 | | | 205,611 | | | — | | | — | | | (133,267) | | | — | | | — | | | 272,720 | | | 13,492 | | |
| Other debt securities | 69,011 | | | 86 | | | 4,521 | | | 215 | | | — | | | — | | | (7,050) | | | — | | | — | | | 66,783 | | | 4,607 | | |
| Equity securities | 74,287 | | | 4,945 | | (3) | 268 | | | 5,900 | | | — | | | (1,474) | | | — | | | — | | | (462) | | | 83,465 | | | 4,063 | | (3) |
| Nonmarketable equity securities | 74,287 | | | 4,945 | | | 268 | | | 5,900 | | | — | | | (1,474) | | | — | | | — | | | (462) | | | 83,465 | | | 4,063 | | |
| Other | 92,292 | | | (128) | | (7) | 101 | | | 27,955 | | | — | | | — | | | (48) | | | — | | | — | | | 120,173 | | | (128) | | (7) |
| Total | ¥ | 1,683,958 | | | ¥ | 143,756 | | | ¥ | 22,810 | | | ¥ | 734,566 | | | ¥ | (355) | | | ¥ | (2,100) | | | ¥ | (160,381) | | | ¥ | 10,442 | | | ¥ | (55,746) | | | ¥ | 2,376,952 | | | ¥156,156 | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Obligation to return securities received as collateral | ¥ | 68,204 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | 5,053 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | 73,257 | | | ¥ | — | | |
| Other | 73,663 | | | (24,475) | | (4) | (5,791) | | | — | | | 23,080 | | | — | | | (54,619) | | | 5,147 | | (6) | (48,605) | | (6) | 28,932 | | | (6,980) | | (4) |
| Total | ¥ | 141,867 | | | ¥ | (24,475) | | | ¥ | (5,791) | | | ¥ | — | | | ¥ | 28,133 | | | ¥ | — | | | ¥ | (54,619) | | | ¥ | 5,147 | | | ¥ | (48,605) | | | ¥ | 102,189 | | | ¥ | (6,980) | | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six month ended September 30, 2024: | | | Total gains (losses)
for the period | | | | | | | | | | | | | | | | Change in unrealized gains (losses) for assets and liabilities still held at September 30, 2024 | |
| | March 31,
2024 | | Included
in
earnings | | Included
in other
comprehensive
income | | Purchases | | Issues | | Sales | | Settlements | | Transfers
into
Level 3 | | Transfers
out of Level 3 | | September 30, 2024 |
| | (in millions) | |
| Assets | | | | | | | | | | | | | | | | | | | | | | |
| Trading account assets: | | | | | | | | | | | | | | | | | | | | | | |
Trading securities(1) | ¥ | 2,041,954 | | | ¥ | (86,296) | | (2) | ¥ | (5,778) | | | ¥ | 356,780 | | | ¥ | — | | | ¥ | (2,059) | | | ¥ | (141,812) | | | ¥ | 78,484 | | | ¥ | — | | | ¥ | 2,241,273 | | | ¥ | (88,871) | | (2) |
| Debt securities | | | | | | | | | | | | | | | | | | | | | | |
| Foreign government and official institution bonds | 101 | | | (1) | | | — | | | — | | | — | | | — | | | (100) | | | — | | | — | | | — | | | — | | |
| Corporate bonds | — | | | (3,751) | | | — | | | 38,158 | | | — | | | — | | | — | | | 78,460 | | (5) | — | | | 112,867 | | | (3,751) | | |
| Asset-backed securities | 1,352,755 | | | (74,833) | | | (5,778) | | | 311,613 | | | — | | | — | | | (121,635) | | | — | | | — | | | 1,462,122 | | | (74,912) | | |
| Other debt securities | 536,846 | | | (8,673) | | | — | | | — | | | — | | | — | | | — | | | — | |
| — | | | 528,173 | | | (8,673) | | |
| Equity securities | 152,252 | | | 962 | | | — | | | 7,009 | | | — | | | (2,059) | | | (20,077) | | | 24 | | | — | |
| 138,111 | | | (1,535) | | |
| Trading derivatives—net | 58,906 | | | 2,123 | | (2) | 981 | | | 670 | | | (312) | | | — | | | (7,460) | | | (14,859) | | | 4,087 | | | 44,136 | | | 23,415 | | (2) |
| Interest rate contracts—net | 39,486 | | | (10,625) | | | (602) | | | — | | | — | | | — | | | 2,889 | | | (13,741) | | (5) | 5,383 | | | 22,790 | | | 8,860 | | |
| Foreign exchange contracts—net | 10,198 | | | 3,559 | | | 862 | | | — | | | — | | | — | | | 434 | | | (1,118) | | | (1,164) | | | 12,771 | | | 6,085 | | |
| Equity contracts—net | 8,258 | | | 9,284 | | | 725 | | | — | | | — | | | — | | | (10,713) | | | — | | | (132) | | | 7,422 | | | 8,565 | | |
| Commodity contracts—net | (45) | | | 25 | | | (4) | | | — | | | — | | | — | | | (6) | | | — | | | — | | | (30) | | | 26 | | |
| Credit derivatives—net | 660 | | | (180) | | | — | | | — | | | — | | | — | | | (64) | | | — | | | — | | | 416 | | | (179) | | |
Other—net(8) | 349 | | | 60 | | | — | | | 670 | | | (312) | | | — | | | — | | | — | | | — | | | 767 | | | 58 | | |
| Investment securities: | | | | | | | | | | | | | | | | | | | | | | |
| Available-for-sale debt securities | 204,805 | | | (12,495) | | (3) | 12,193 | | | 39 | | | — | | | — | | | (7,598) | | | — | | | (743) | | | 196,201 | | | (390) | | (3) |
| Corporate bonds | 5,172 | | | 324 | | | (139) | | | — | | | — | | | — | | | — | | | — | | | (743) | |
| 4,614 | | | 157 | | |
| Residential mortgage-backed securities | 15 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 15 | | | — | | |
| Asset-backed securities | 132,951 | | | — | | | 9,973 | | | — | | | — | | | — | | | — | | | — | | | — | | | 142,924 | | | 9,973 | | |
| Other debt securities | 66,667 | | | (12,819) | | | 2,359 | | | 39 | | | — | | | — | | | (7,598) | | | — | | | — | | | 48,648 | | | (10,520) | | |
| Equity securities | 87,814 | | | (149) | | (3) | 445 | | | 5,390 | | | — | | | (519) | | | — | | | 779 | | | (1,892) | | | 91,868 | | | (542) | | (3) |
| Nonmarketable equity securities | 87,814 | | | (149) | | | 445 | | | 5,390 | | | — | | | (519) | | | — | | | 779 | | | (1,892) | | | 91,868 | | | (542) | | |
| Other | 139,120 | | | (400) | | (7) | 133 | | | 8,898 | | | — | | | — | | | (17,721) | | | — | | | — | | | 130,030 | | | (400) | | (7) |
| Total | ¥ | 2,532,599 | | | ¥ | (97,217) | | | ¥ | 7,974 | | | ¥ | 371,777 | | | ¥ | (312) | | | ¥ | (2,578) | | | ¥ | (174,591) | | | ¥ | 64,404 | | | ¥ | 1,452 | | | ¥ | 2,703,508 | | | ¥ | (66,788) | | |
| Liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Obligation to return securities received as collateral | ¥ | 71,399 | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | — | | | ¥ | (17,572) | | | ¥ | — | | | ¥ | — | | | ¥ | 53,827 | | | ¥ | — | | |
| Other | 66,452 | | | (2,319) | | (4) | (3,502) | | | — | | | 9,028 | | | — | | | (21,879) | | | 2,213 | | (6) | (8,384) | | (6) | 53,251 | | | (48) | | (4) |
| Total | ¥ | 137,851 | | | ¥ | (2,319) | | | ¥ | (3,502) | | | ¥ | — | | | ¥ | 9,028 | | | ¥ | — | | | ¥ | (39,451) | | | ¥ | 2,213 | | | ¥ | (8,384) | | | ¥ | 107,078 | | | ¥ | (48) | | |
Notes:
(1)Includes Trading securities measured under the fair value option.
(2)Included in Trading account profits (losses)—net and Foreign exchange gains (losses)—net.
(3)Included in Investment securities gains (losses)—net and Other comprehensive income, net of tax.
(4)Included in Trading account losses—net and Other comprehensive income, net of tax.
(5)For the six months ended September 30, 2023 and 2024, transfers into Level 3 for Interest rate contracts—net were mainly caused by changes in the impact of unobservable input to the entire fair value measurement. Unobservable inputs include loss given default. Transfers into Level 3 for Corporate bonds were mainly caused by the increased impact of the Liquidity Premium on Fair Value. Transfers out of Level 3 for Interest rate contracts—net were mainly caused by changes in the impact of unobservable inputs to the fair value measurement of the multi-callable swaps.
(6)Transfers into (out of) Level 3 for long-term debt in Other were mainly caused by the decrease (increase) in the observability of the key inputs to the valuation models and a corresponding increase (decrease) in the significance of the unobservable inputs.
(7)Included in Other non-interest income.
(8)Includes certain derivatives such as earthquake derivatives.
Quantitative Information about Level 3 Fair Value Measurements
The following tables present information on the valuation techniques, significant unobservable inputs and their ranges for each major category of assets and liabilities measured at fair value on a recurring basis and classified in Level 3:
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2024 | Fair value(1) | | Valuation technique | | Significant unobservable inputs | | Range | | Weighted average(2) | |
| | (in millions) | | | | | | | | | | | |
| Assets | | | | | | | | | | | | |
| Trading securities and Investment securities: | | | | | | | | | | | | |
| Asset-backed securities | ¥ | 1,248,241 | | | Internal model(4) | | Asset correlations | | 3.0% | | 3.0 | % | |
| | | | | Discount factor | | 1.4 | % | ~ | 1.6 | % | | 1.4 | % | |
| | | | | Prepayment rate | | 17.7% | | 17.7 | % | |
| | | | | Probability of default | | 0.0 | % | ~ | 93.0 | % | | — | | (3) |
| | | | | Recovery rate | | 55.0% | | 55.0 | % | |
| Other debt securities | 587,272 | | | Discounted cash flow | | Liquidity premium | | 0.9 | % | ~ | 3.2 | % | | 2.8 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At March 31, 2024 | Fair value(1) | | Valuation technique | | Significant unobservable inputs | | Range | | Median(2) |
| | (in millions) | | | | | | | | | | |
| Trading derivatives—net: | | | | | | | | | | | |
| Interest rate contracts—net | 41,687 | | | Option model | | Correlation between interest rates | | 30.0 | % | ~ | 60.7 | % | | 44.6 | % |
| | | | | Correlation between interest rate and foreign exchange rate | | (2.0) | % | ~ | 60.0 | % | | 35.0 | % |
| | | | | Volatility | | 61.2 | % | ~ | 80.6 | % | | 75.6 | % |
| Foreign exchange contracts—net | 9,800 | | | Option model | | Correlation between interest rates | | 30.0 | % | ~ | 70.0 | % | | 48.2 | % |
| | | | | Correlation between interest rate and foreign exchange rate | | 17.6 | % | ~ | 60.0 | % | | 36.3 | % |
| | | | | Correlation between foreign exchange rates | | 50.0 | % | ~ | 70.6 | % | | 66.4 | % |
| | | | | Volatility | | 9.9 | % | ~ | 21.3 | % | | 14.1 | % |
| Equity contracts—net | 4,414 | | | Option model | | Correlation between foreign exchange rate and equity | | 0.0 | % | ~ | 30.0 | % | | 20.0 | % |
| | | | | Correlation between equities | | 5.0 | % | ~ | 76.0 | % | | 57.5 | % |
| | | | | Volatility | | 25.0 | % | ~ | 37.0 | % | | 33.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2024 | Fair value(1) | | Valuation technique | | Significant unobservable inputs | | Range | | Weighted average(2) | |
| | (in millions) | | | | | | | | | | | |
| Assets | | | | | | | | | | | | |
| Trading securities and Investment securities: | | | | | | | | | | | | |
| Corporate bonds | ¥ | 112,867 | | | Discounted cash flow | | Liquidity premium | | 0.0 | % | ~ | 0.2 | % | | 0.1 | % | |
| Asset-backed securities | 1,324,522 | | | Internal model(4) | | Asset correlations | | 3.0% | | 3.0 | % | |
| | | | | Discount factor | | 1.2 | % | ~ | 1.4 | % | | 1.3 | % | |
| | | | | Prepayment rate | | 25.4% | | 25.4 | % | |
| | | | | Probability of default | | 0.0 | % | ~ | 99.0 | % | | — | % | (3) |
| | | | | Recovery rate | | 63.1% | | 63.1 | % |
|
| Other debt securities | 570,116 | | | Discounted cash flow | | Liquidity premium | | 1.6 | % | ~ | 3.2 | % | | 2.9 | % | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At September 30, 2024 | Fair value(1) | | Valuation technique | | Significant unobservable inputs | | Range | | Median(2) |
| | (in millions) | | | | | | | | | | |
| Trading derivatives—net: | | | | | | | | | | | |
| Interest rate contracts—net | 27,919 | | | Option model | | Correlation between interest rates | | 30.0 | % | ~ | 97.5 | % | | 59.6 | % |
| | | | | Correlation between interest rate and foreign exchange rate | | 5.0 | % | ~ | 60.0 | % | | 34.5 | % |
| | | | | Volatility | | 71.2 | % | ~ | 104.5 | % | | 77.9 | % |
| Foreign exchange contracts—net | 12,571 | | | Option model | | Correlation between interest rates | | 30.0 | % | ~ | 70.0 | % | | 42.8 | % |
| | | | | Correlation between interest rate and foreign exchange rate | | 16.3 | % | ~ | 60.0 | % | | 33.6 | % |
| | | | | Correlation between foreign exchange rates | | 50.0 | % | ~ | 66.4 | % | | 58.2 | % |
| | | | | Volatility | | 10.6 | % | ~ | 21.0 | % | | 13.9 | % |
| Equity contracts—net | 3,062 | | | Option model | | Correlation between foreign exchange rate and equity | | 6.0 | % | ~ | 25.0 | % | | 10.0 | % |
| | | | | Correlation between equities | | 8.8 | % | ~ | 95.0 | % | | 59.6 | % |
| | | | | Volatility | | 23.0 | % | ~ | 37.0 | % | | 27.0 | % |
| | | | | | | | | | | |
Notes:
(1)The fair value as of March 31, 2024 and September 30, 2024 excludes the fair value of investments valued using vendor prices.
(2)Weighted average is calculated by weighing each input by the relative fair value of the respective financial instruments for investment securities. Median is used for derivative instruments.
(3)See “Probability of default” in “Change in and range of unobservable inputs” in Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
(4)For further detail of Internal model, refer to the last paragraph of “Trading Account Assets and Liabilities—Trading Account Securities” in Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
Changes in and range of unobservable inputs
For a discussion of the impact on fair value of changes in unobservable inputs and the relationships between unobservable inputs as well as a description of attributes of the underlying instruments and external market factors that affect the range of inputs used in the valuation of the MUFG Group’s Level 3 financial instruments, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities may be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets are subject to fair value adjustments that result from the application of the lower of cost or fair value accounting, write-downs of individual assets or the measurement alternative for nonmarketable equity securities. See Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024 for further information on assets and liabilities measured at fair value on a nonrecurring basis.
The following table presents the carrying value of assets measured at fair value on a nonrecurring basis by level within the fair value hierarchy as of March 31, 2024 and September 30, 2024:
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024
(As Adjusted) | | September 30, 2024 |
| | Level 1 | | Level 2 | | Level 3 | | Total carrying value | | Level 1 | | Level 2 | | Level 3 | | Total
carrying value |
| | (in millions) |
| Assets | | | | | | | | | | | | | | | |
Investment securities(1)(2) | ¥ | — | | | ¥ | 9,460 | | | ¥ | 45,175 | | | ¥ | 54,635 | | | ¥ | — | | | ¥ | 12,290 | | | ¥ | 36,235 | | | ¥ | 48,525 | |
| Loans | 2,271 | | | 5,181 | | | 630,005 | | | 637,457 | | | 1,990 | | | 4,689 | | | 570,953 | | | 577,632 | |
| Loans held for sale | — | | | — | | | 472,711 | | | 472,711 | | | — | | | — | | | 415,216 | | | 415,216 | |
| Collateral dependent loans | 2,271 | | | 5,181 | | | 157,294 | | | 164,746 | | | 1,990 | | | 4,689 | | | 155,737 | | | 162,416 | |
| Premises and equipment | — | | | — | | | 11,193 | | | 11,193 | | | — | | | — | | | 5,902 | | | 5,902 | |
| Intangible assets | — | | | — | | | 5,174 | | | 5,174 | | | — | | | — | | | 169 | | | 169 | |
| Other assets | — | | | 32,481 | | | 18,567 | | | 51,048 | | | — | | | 5,154 | | | 16,218 | | | 21,372 | |
Investments in equity method investees(1) | — | | | 27,801 | | | 1,702 | | | 29,503 | | | — | | | — | | | 2,094 | | | 2,094 | |
| Other | — | | | 4,680 | | | 16,865 | | | 21,545 | | | — | | | 5,154 | | | 14,124 | | | 19,278 | |
| Total | ¥ | 2,271 | | | ¥ | 47,122 | | | ¥ | 710,114 | | | ¥ | 759,507 | | | ¥ | 1,990 | | | ¥ | 22,133 | | | ¥ | 629,477 | | | ¥ | 653,600 | |
Notes:
(1)Excludes certain investments valued at net asset value of ¥18,037 million and ¥19,833 million at March 31, 2024 and September 30, 2024, respectively. The unfunded commitments related to these investments are ¥24,208 million and ¥22,377 million at March 31, 2024 and September 30, 2024, respectively. These investments are in private equity funds. For the nature and details of private equity funds, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
(2)Includes certain nonmarketable equity securities that are measured at fair value on a nonrecurring basis, including impairment and observable price change for nonmarketable equity securities measured under the measurement alternative.
The following table presents losses recorded as a result of changes in the fair value of assets measured at fair value on a nonrecurring basis for the six months ended September 30, 2023 and 2024:
| | | | | | | | | | | |
| | Losses for the six months ended September 30, |
| | 2023
(As Adjusted) | | 2024 |
| | (in millions) |
| Investment securities | ¥ | 8,971 | | | ¥ | 8,473 | |
| Loans | 45,660 | | | 23,967 | |
| Loans held for sale | 11,096 | | | 1,480 | |
| Collateral dependent loans | 34,564 | | | 22,487 | |
| Premises and equipment | 1,142 | | | 13,072 | |
| Intangible assets | 11,433 | | | 1,706 | |
| Other assets | 24,286 | | | 15,257 | |
| Investments in equity method investees | 12,687 | | | 274 | |
| Other | 11,599 | | | 14,983 | |
| Total | ¥ | 91,492 | | | ¥ | 62,475 | |
Loans held for sale are recorded at the lower of cost or fair value. The fair value of loans held for sale is based on secondary market prices, where available. Where no such price exists, the fair value is determined using prices observed in the market for a similar asset or assets, or determined based on discounted cash flows, which may be adjusted, as appropriate, to reflect other market conditions or the perceived credit risk of the borrower. These loans are principally classified in Level 3 of the fair value hierarchy,
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
except when quoted prices are available but not traded actively, which results in such loans held for sale being classified in Level 2 of the fair value hierarchy.
The significant unobservable inputs used for the fair value measurements of loans held for sale based on adjusted prices, which are categorized within Level 3 of the fair value hierarchy, consisted of prices ranging from ¥4.21 to ¥100.00 and from ¥6.67 to ¥100.00 as of March 31, 2024 and September 30, 2024, respectively, and the weighted average of prices were ¥83.38 and ¥95.61 as of March 31, 2024 and September 30, 2024, respectively. The significant unobservable inputs used for the fair value measurements of loans held for sale based on discounted cash flows, which are categorized within Level 3 of the fair value hierarchy, consisted of discount rates ranging from 0.83% to 11.87% and from 1.33% to 10.36% as of March 31, 2024 and September 30, 2024, respectively, and the weighted averages of the discount rates were 11.51% and 10.11% as of March 31, 2024 and September 30, 2024, respectively. Weighted average is calculated by weighing each input by the relative fair value of the respective financial instruments.
Fair Value Option
For a discussion of the primary financial instruments for which the fair value option was previously elected, including the basis for those, see Note 31 to the consolidated financial statements for the fiscal year ended March 31, 2024.
The following table presents the gains or losses recorded for the six months ended September 30, 2023 and 2024 related to the eligible instruments for which the MUFG Group elected the fair value option:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended September 30, |
| | 2023 | | 2024 |
| | Trading account profits (losses) | | Foreign exchange gains (losses) | | Total changes in fair value | | Trading account profits (losses) | | Foreign exchange gains (losses) | | Total changes in fair value |
| | (in millions) |
| Financial assets: | | | | | | | | | | | |
| Trading account securities | ¥ | (596,477) | | | ¥ | 1,762,384 | | | ¥ | 1,165,907 | | | ¥ | 384,525 | | | ¥ | (816,042) | | | ¥ | (431,517) | |
| Total | ¥ | (596,477) | | | ¥ | 1,762,384 | | | ¥ | 1,165,907 | | | ¥ | 384,525 | | | ¥ | (816,042) | | | ¥ | (431,517) | |
| Financial liabilities: | | | | | | | | | | | |
Other short-term borrowings(1) | ¥ | 2,592 | | | ¥ | — | | | ¥ | 2,592 | | | ¥ | 6,225 | | | ¥ | — | | | ¥ | 6,225 | |
Long-term debt(1) | (5,617) | | | — | | | (5,617) | | | 16,488 | | | — | | | 16,488 | |
| Total | ¥ | (3,025) | | | ¥ | — | | | ¥ | (3,025) | | | ¥ | 22,713 | | | ¥ | — | | | ¥ | 22,713 | |
Note:
(1)Change in value attributable to the instrument-specific credit risk related to those financial liabilities are not material.
The following table presents the differences between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of March 31, 2024 and September 30, 2024 for long-term debt instruments for which the fair value option has been elected:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | September 30, 2024 |
| | Remaining aggregate contractual amounts outstanding | | Fair value | | Fair value over (under) remaining aggregate contractual amounts outstanding | | Remaining aggregate contractual amounts outstanding | | Fair value | | Fair value over (under) remaining aggregate contractual amounts outstanding |
| | (in millions) |
| Financial liabilities: | | | | | | | | | | | |
| Long-term debt | ¥ | 246,153 | | | ¥ | 234,909 | | | ¥ | (11,244) | | | ¥ | 205,399 | | | ¥ | 200,462 | | | ¥ | (4,937) | |
| Total | ¥ | 246,153 | | | ¥ | 234,909 | | | ¥ | (11,244) | | | ¥ | 205,399 | | | ¥ | 200,462 | | | ¥ | (4,937) | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Interest income and expense related to the assets and liabilities for which the fair value option is elected are measured based on the contractual rates and dividend income related to these assets are recognized when the shareholder right to receive the dividend is established. These interest income and expense and dividend income are reported in the accompanying condensed consolidated statements of income as either interest income or expense, depending on the nature of the related asset or liability.
Estimated Fair Value of Financial Instruments
The following is a summary of carrying amounts and estimated fair values by level within the fair value hierarchy of financial instruments which are not carried at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of March 31, 2024 and September 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At March 31, 2024
(As Adjusted) |
| | Carrying amount | | Estimated fair value |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| | (in billions) |
| Financial assets: | | | | | | | | | |
| Cash and due from banks | ¥ | 4,417 | | | ¥ | 4,417 | | | ¥ | 4,417 | | | ¥ | — | | | ¥ | — | |
| Interest-earning deposits in other banks | 105,702 | | | 105,702 | | | — | | | 105,702 | | | — | |
| Call loans and funds sold | 1,738 | | | 1,738 | | | — | | | 1,738 | | | — | |
| Receivables under resale agreements | 18,824 | | | 18,824 | | | — | | | 18,824 | | | — | |
| Receivables under securities borrowing transactions | 5,001 | | | 5,001 | | | — | | | 5,001 | | | — | |
| Investment securities | 24,844 | | | 24,558 | | | 14,522 | | | 7,457 | | | 2,579 | |
Loans, net of allowance for credit losses(1) | 126,555 | | | 126,707 | | | 2 | | | 295 | | | 126,410 | |
Other financial assets(2) | 11,761 | | | 11,761 | | | — | | | 11,761 | | | — | |
| Financial liabilities: | | | | | | | | | |
| Deposits | | | | | | | | | |
| Non-interest-bearing | ¥ | 38,805 | | | ¥ | 38,805 | | | ¥ | — | | | ¥ | 38,805 | | | ¥ | — | |
| Interest-bearing | 208,360 | | | 208,512 | | | — | | | 208,512 | | | — | |
| Total deposits | 247,165 | | | 247,317 | | | — | | | 247,317 | | | — | |
| Call money and funds purchased | 5,094 | | | 5,094 | | | — | | | 5,094 | | | — | |
| Payables under repurchase agreements | 35,690 | | | 35,690 | | | — | | | 35,690 | | | — | |
| Payables under securities lending transactions | 1,017 | | | 1,017 | | | — | | | 1,017 | | | — | |
| Due to trust account and other short-term borrowings | 15,747 | | | 15,747 | | | — | | | 15,747 | | | — | |
| Long-term debt | 39,833 | | | 39,103 | | | — | | | 39,103 | | | — | |
| Other financial liabilities | 9,081 | | | 9,081 | | | — | | | 9,081 | | | — | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | At September 30, 2024 |
| | Carrying
amount | | Estimated fair value |
| | Total | | Level 1 | | Level 2 | | Level 3 |
| | (in billions) |
| Financial assets: | | | | | | | | | |
| Cash and due from banks | ¥ | 4,056 | | | ¥ | 4,056 | | | ¥ | 4,056 | | | ¥ | — | | | ¥ | — | |
| Interest-earning deposits in other banks | 104,084 | | | 104,084 | | | — | | | 104,084 | | | — | |
| Call loans and funds sold | 1,463 | | | 1,463 | | | — | | | 1,463 | | | — | |
| Receivables under resale agreements | 18,414 | | | 18,414 | | | — | | | 18,414 | | | — | |
| Receivables under securities borrowing transactions | 5,535 | | | 5,535 | | | — | | | 5,535 | | | — | |
| Investment securities | 22,739 | | | 22,549 | | | 12,927 | | | 7,799 | | | 1,823 | |
Loans, net of allowance for credit losses(1) | 128,849 | | | 129,101 | | | 2 | | | 298 | | | 128,801 | |
Other financial assets(2) | 9,453 | | | 9,453 | | | — | | | 9,453 | | | — | |
| Financial liabilities: | | | | | | | | | |
| Deposits | | | | | | | | | |
| Non-interest-bearing | ¥ | 38,259 | | | ¥ | 38,259 | | | ¥ | — | | | ¥ | 38,259 | | | ¥ | — | |
| Interest-bearing | 206,662 | | | 206,815 | | | — | | | 206,815 | | | — | |
| Total deposits | 244,921 | | | 245,074 | | | — | | | 245,074 | | | — | |
| Call money and funds purchased | 4,944 | | | 4,944 | | | — | | | 4,944 | | | — | |
| Payables under repurchase agreements | 37,724 | | | 37,724 | | | — | | | 37,724 | | | — | |
| Payables under securities lending transactions | 644 | | | 644 | | | — | | | 644 | | | — | |
| Due to trust account and other short-term borrowings | 27,278 | | | 27,278 | | | — | | | 27,278 | | | — | |
| Long-term debt | 24,418 | | | 23,958 | | | — | | | 23,958 | | | — | |
| Other financial liabilities | 8,192 | | | 8,192 | | | — | | | 8,192 | | | — | |
Notes:
(1)Includes loans held for sale and collateral dependent loans measured at fair value on a nonrecurring basis. Refer to “Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis” for the details of the level classification.
(2)Excludes investments in equity method investees of ¥4,116 billion and ¥4,197 billion at March 31, 2024 and September 30, 2024, respectively.
The fair values of certain off-balance sheet financial instruments held for purposes other than trading, including commitments to extend credit and commercial letters of credit, are estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the credit quality. The aggregate fair value of such instruments at March 31, 2024 and September 30, 2024 was not material.
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
19. INVESTMENTS IN EQUITY METHOD INVESTEES
Summarized Financial Information of the MUFG Group’s Equity Method Investee
Summarized operating results of Morgan Stanley, the largest portion of the MUFG Group’s equity method investees, for the six months ended September 30, 2023 and 2024 are as follows:
| | | | | | | | | | | |
| 2023 | | 2024 |
| (in billions) |
| Net revenues | ¥ | 3,769 | | | ¥ | 4,640 | |
| Total non-interest expenses | 2,887 | | | 3,351 | |
| Income from continuing operations before income taxes | 840 | | | 1,266 | |
| Net income applicable to Morgan Stanley | 647 | | | 956 | |
Mitsubishi UFJ Financial Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
20. SUBSEQUENT EVENTS
Approval of Dividends
On November 14, 2024, the Board of Directors of MUFG approved the payment of semi-annual interim cash dividends of ¥25.0 per share of Common stock, totaling ¥292,259 million, that were payable on December 5, 2024 to the shareholders of record on September 30, 2024.
Repurchase and Cancellation of own shares
At the meeting of the Board of Directors of MUFG held on November 14, 2024, it was resolved to repurchase up to 230,000,000 shares of MUFG’s common stock by market purchases based on the discretionary dealing contract regarding repurchase of its own shares for approximately ¥300 billion, in aggregate, from November 15, 2024 to March 31, 2025. The repurchase plan as authorized by the Board of Directors of MUFG allowed for the repurchase of an aggregate amount of up to 230,000,000 shares, which represents the equivalent of 2.0% of the total number of common shares outstanding excluding its own shares, or of an aggregate repurchase amount of up to ¥300 billion. The purpose of the repurchase is to enhance the return of earnings to shareholders, to improve capital efficiency, and to implement flexible capital policies. Also, on November 29, 2024, MUFG canceled 270,000,000 shares in satisfaction of the resolution adopted at the meeting of the Board of Directors of MUFG held on November 14, 2024.
* * * * *
