Japan’s two biggest banks released contrasting earnings results for their fiscal first quarter on Tuesday, while showing an apparent immunity to the euro-zone debt crisis, unlike some other global lenders.
Mitsubishi UFJ Financial Group Inc. MTU -0.82 percent said net profit in the April-June quarter slid 64 percent from a year earlier, partly on the lower value of its equity holdings.
Japan’s largest bank by assets, which has about a 22 percent stake in Morgan Stanley, MS +1.11 percent logged a JPY 182.92 billion ($2.34 billion) group net profit for the three-month period, compared with a JPY 500.58 billion profit in the same quarter of the previous year, when it enjoyed a one-time gain from the conversion of its holdings of preferred shares in Morgan Stanley into common shares.
Weak financial market conditions weighed on MUFG’s profits, forcing it to book losses of about JPY 54.5 billion on its equity holdings.
The Nikkei Stock Average dropped about 11 percent during the April-June period, in part due to concerns over the global market instability sparked by the European debt crisis. The Tokyo market has continues to tumble since the end of June.
Because Japanese banks have traditionally held chunky stakes in their affiliates and clients to cement ties, they are vulnerable to stock market declines, which could force them to book valuation losses on their holdings.
MUFG’s large profit last year was largely attributable to bond-trading activities – a factor that helped all of the country’s biggest banks post robust profits in the fiscal year that ended March 31. In the first quarter of the current fiscal year, MUFG reported even stronger profits from bond trading; its gain of JPY 217.0 billion from its dealings with JGBs was nearly triple the corresponding figure from a year earlier.
Separately, Mizuho Financial Group Inc. 8411.TO +0.78 percent said its net profit nearly doubled in the three months to June, also driven by gains from Japanese government bond trading.
Japan’s second-largest bank posted a net profit of JPY 183.92 billion for the quarter, compared with a net profit of JPY 96.36 billion in the same period a year ago.
The bank said profit from bond trading grew nearly six-fold to JPY 126.9 billion from the year earlier period. In addition, it said its brokerage arm Mizuho Securities swung into the black with a net profit of JPY 5.4 billion – the first profit in seven quarters as efforts to carry out reform steps start to pay off.
Mizuho left unchanged its group earnings forecast for the full fiscal year through March 2013. The company continues to expect a net profit of JPY 500 billion.
MUFG also kept intact its group earnings forecast for the full fiscal year. The company is expecting a net profit of JPY 670 billion.
Both MUFG and Mizuho report their earnings under Japanese accounting standards. -By ATSUKO FUKASE