Takahiro Yano

Takahiro Yano asked for a detailed breakdown of the variance in the revised targets for NOP (up JPY 50 billion) and ordinary profits (up JPY 150 billion). He also inquired if CEO Kamezawa's recent comments about achieving global top-tier ROE hinted at a change to the current 12% ROE target or if they were consistent with previous statements.

Answer

Jun Togawa, Group CFO, broke down the NOP variance: JPY 25 billion from FOREX, JPY 130 billion from treasury trading gains concentrated in the first half, and JPY 100 billion in increased expenses, resulting in a JPY 50 billion NOP upside. For ordinary profit, he cited a JPY 100 billion one-off step-up gain from ownership interest increase and Morgan Stanley's profit. Regarding CEO Kamezawa's comments, Togawa clarified that the immediate focus is on achieving the 12% ROE target, and Kamezawa's statements are within that context.

Takahiro Yano asked for a detailed breakdown of the revised target, specifically the JPY 50 billion NOP increase and JPY 150 billion ordinary profit increase, clarifying any 'tricky' elements within NOP. He also inquired if CEO Kamezawa's comments about achieving 'global top-tier ROE' hinted at a change to the current 12% ROE target or what it implied.

Answer

Jun Togawa (Senior Managing Corporate Executive and Group CFO, MUFG) detailed the NOP increase: JPY 25 billion from FOREX, JPY 130 billion from treasury trading gains concentrated in H1, and about JPY 100 billion in expense increases. For ordinary profit, a JPY 100 billion one-off step-up gain from increased ownership interest combined with Morgan Stanley's profit increase led to the JPY 150 billion revision. Regarding CEO Kamezawa's comments, Togawa-san stated they would first focus on achieving the 12% ROE target, implying no immediate change.

Requested clarification on the one-off factors contributing to the high first-half ROE and what the base case ROE is, and asked if there are new drivers for the improvement in domestic corporate lending rates.

Answer

The high first-half ROE was influenced by one-off factors like the inclusion of 15 months of Morgan Stanley earnings and the front-loading of Treasury gains. A realistic full-year ROE, considering these factors and the FX impact, is estimated to be around 8%. The improvement in domestic lending spreads is not due to new drivers or anticipation of rate hikes, but rather consistent negotiation on every loan and a focus on high-margin deals like LBO and real estate finance.