Clarification on the CET1 ratio forecast (10%-10.5%) and its breakdown. Also, thoughts on increasing concentration of risk in the U.S. private credit market, especially large-scale loans to data centers.

CET1 ratio is expected to be between 10% and 10.5% by end of FY25, factoring in net income accumulation (+80bps), shareholder returns (-65bps), and risk asset increase (-30bps). MUFG has limited exposure to private credit, but acknowledges the market's strength and volatility. Lending to data centers requires careful project selection. “MUFG actually does not have a significant exposure. We have some exposure to companies that have been mentioned in the media. But as you saw earlier, our NPL ratio is declining. So I do not think we have a significant exposure.”

Detailed breakdown of the JPY 100 billion net income target revision, specifically how customer segment, equity method investees, and financial indicators contribute. Also, the operational policy for Global Markets in the second half, given first-half performance.

The JPY 100 billion revision includes JPY 30 billion from customer segment NOP, a certain amount from Morgan Stanley's equity earnings, JPY 40 billion from one-off gains (JACCS, Tidlor, liquidation), and JPY 30 billion from financial indicators (mainly weak yen). Global Markets will continue gradually building yen bond positions while monitoring policy rates, and foreign bond duration has shortened to 4 years. “The revision of financial indicators is expected to have an impact of approximately JPY 30 billion, mainly due to the weak yen.”

Is the strong first-half growth in net fees and commissions sustainable? And why did the CET1 ratio worsen by 40bps due to FX in H1 when the yen didn't appreciate significantly between March and September?

Fee revenue growth is expected to continue, driven by ongoing O&D initiatives in GCIB, growing solution-related fees, and steady AUM growth in asset management, beyond the JPY 48 billion acquisition impact. The 40bps CET1 decline from FX was primarily due to yen appreciation against the dollar between December and June, with hedging measures implemented later. A weak yen environment would generally lift the CET1 ratio. “Acquisition of WealthNavi, MPMS acquired by our Trust Bank and NICOS acquiring Zenhoren has resulted in a total acquisition effect of about JPY 48 billion.”

MUFG

Mitsubishi UFJ Financial Group (MUFG) Q2 FY25 earnings call: guidance and Q&A

Earnings call· Sep 2025 (Q2 FY25)· Financials· Nov 17, 2025

Source: earnings call transcript

Executive summary

Mitsubishi UFJ Financial Group Q2 FY25 — Record Half-Year Profit and Upgraded Outlook

Mitsubishi UFJ Financial Group reported record first-half profits for FY25, driven by strong core business performance, including increased net operating profits and equity-accounted earnings from Morgan Stanley. The company raised its full-year net income target and announced increased shareholder returns through higher dividends and an additional JPY 250 billion share repurchase. Strategic investments in AI and digital banking are underway, with a clear path outlined for achieving a 12% mid- to long-term ROE target.

Highlights

Profits attributable to owners of parent reached a record high of JPY 1,292.9 billion for the first half of FY25.
Net operating profits increased by JPY 61.3 billion year-on-year, driven by rising yen interest rates and improved lending spreads.
Net fees and commissions expanded significantly, partly due to JPY 48 billion from acquisitions and growth in solution services.
Full-year net income target revised up by JPY 100 billion to JPY 2.1 trillion.
Annual dividend forecast for FY25 increased to JPY 74 per share, up JPY 4 from initial forecast.

Concerns

Net gains and losses on equity securities decreased by JPY 235.3 billion year-on-year due to a large gain on sale in the prior year.
CET1 ratio fell 30 basis points from end of March to 10.5% due to growth investments, loan increase, and yen appreciation.
G&A expenses increased by JPY 127.9 billion year-on-year due to inflation, acquisitions, and strategic investments.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year FY25 Net Income	JPY 2.1 trillion high materiality	FY25	High
Dividend Payout Ratio	approximately 40% high materiality	ongoing	High
Annual Dividend per Share	JPY 74 high materiality	FY25	High
Full-year Share Repurchase Program	JPY 500 billion high materiality	FY25	High
AI Use Cases	over 250 cases medium materiality	by FY26	High
Mid- to Long-Term ROE	12% high materiality	mid- to long-term	High
Full-year Credit Costs	unchanged medium materiality	FY25	High
CET1 Ratio	between 10% and 10.5% high materiality	end of FY25	High

Product announcements

Product	Type	Timeline	Details
EMUTO	launch	June this year

Deals & partnerships

WealthNavi Acquisition of WealthNavi

Acquisition of WealthNavi by MUFG.

MPMS Acquisition of MPMS

MPMS acquired by MUFG's Trust Bank.

Zenhoren Acquisition of Zenhoren

NICOS acquiring Zenhoren.

JACCS Increase in ownership interest in JACCS

Step-up gains from acquiring shares of JACCS.

Tidlor Acquisition of Tidlor as a subsidiary

One-off gains from acquisition of Tidlor as a subsidiary.

OpenAI Strategic partnership for AI transformation

Launch of a new strategic partnership with OpenAI to accelerate AI adoption and collaborate on services.

Risks & headwinds

Decrease in net gains and losses on equity securities H1 FY25

JPY 235.3 billion decrease year-on-year

Mitigation:In line with projection at the beginning of FY25, due to gain on sale of large equity holdings last year.

Increased G&A expenses H1 FY25

JPY 127.9 billion increase year-on-year

Mitigation:Due to impact of inflation and acquisitions, as well as strategic expense allocation, mainly in Retail and Digital business group.

Economic slowdown in Asia H1 FY25

Affected Global Commercial Banking

Mitigation:GCIB is promoting O&D measures and working to improve capital efficiency.

Yen appreciation impact on CET1 ratio H1 FY25

CET1 ratio fell 30 basis points from end of March

Mitigation:Expects ratio to remain around midpoint of target range by FY25 end; weak yen would lift CET1 ratio.

Private credit market volatility current

Extremely strong market with recent increase in volatility

Mitigation:MUFG has limited exposure; careful project selection for lending to data centers.

Impact of tariffs on credit costs FY25

Full year credit costs will depend on the impact of tariffs

Mitigation:Full year outlook for credit costs kept unchanged.

What to watch in Q3 FY25

Mid- to long-term ROE target achievement

mid- to long-term

Current 12% target

Target Progress towards 12%

Why it matters

This is a key strategic goal and investment evaluation criterion for the company's future profitability.

Regarding the mid- to long-term ROE target of 12%, I want to know if there were any changes in your thinking and the management's perspective, reflecting the changes in the environment or tailwinds.

Find out whether MUFG delivers this. Inve re-checks your case every morning.

Q&A highlights

Why is the JPY 100 billion revision considered small given current market conditions (Nikkei, USD/JPY)? And has the thinking behind the 12% ROE target changed, especially regarding assumptions like 1% interest rate and no equity sale gains?

The JPY 100 billion revision was deemed appropriate for timely disclosure, despite internal discussions on its size. Assumptions for the second half include a strong yen and increased strategic expenses. The 12% ROE target's assumptions (1% policy rate, no equity sale gains) were clarified in writing due to investor questions, and the company is now evaluating investments based on their contribution to this ROE target.

“We originally began the discussions to set the 12% target by trying to see how much we can increase our profit under the assumptions that Japan's policy interest rate will be around 1% and that we have no gain on sale of equity holdings, which I strongly insisted.”

asked by Ken Takamiya · answered by Jun Togawa

2 min read 6 chapters

Detailed narrative

Strong First Half Performance and Upgraded Outlook

MUFG delivered a record high first-half profit of JPY 1,292.9 billion, representing 64.6% progress towards its initial full-year target. This strong performance led to an upward revision of the full-year net income target by JPY 100 billion to JPY 2.1 trillion. The revision was attributed to better-than-planned customer segment NOP, lower credit costs, strong Morgan Stanley equity-accounted earnings, and one-time gains.

Core Business Strength and Fee Income Growth

The company's core business demonstrated strength with net operating profits increasing by JPY 61.3 billion year-on-year. This was supported by rising yen interest rates, improving lending spreads, and benefits from bond portfolio rebalancing. Net fees and commissions expanded significantly, driven by growth in domestic and overseas solution services and the impact of recent acquisitions, contributing approximately JPY 48 billion.

Capital Management and Shareholder Returns

MUFG maintains a strong capital position, with the CET1 ratio at 10.5% at the upper end of its target range, despite growth investments and loan increases. The company announced an additional JPY 250 billion in share repurchases for the second half, bringing the full-year total to JPY 500 billion, alongside the cancellation of 200 million treasury shares.

The annual dividend forecast for FY25 was raised to JPY 74 per share, reflecting the revised profit target and a commitment to a 40% payout ratio.

Strategic Investments and AI Transformation

MUFG is actively pursuing transformation and innovation, with a focus on becoming an "AI-native company." The number of AI use cases has reached 116, with a target to exceed 250 by FY26, expecting cumulative benefits of approximately JPY 30 billion over the current MTBP.

A new strategic partnership with OpenAI is expected to accelerate AI adoption across the company, particularly in digital banking and retail services.

Progress on Mid-Term Business Plan (MTBP) and ROE Target

The company is making steady progress on its three pillars of the MTBP, including expanding growth strategies, social and environmental progress, and transformation. NOP from growth strategies increased by approximately JPY 150 billion compared to FY23. MUFG reiterated its mid- to long-term ROE target of 12%, clarifying assumptions such as a policy rate of around 1% and no future gain on sale from equity holdings reduction.

Asset Quality and Balance Sheet Health

The NPL ratio remains at a low level, and credit costs decreased by JPY 65.7 billion year-on-year, partly due to reversals of large loan loss provisions. Loans increased by JPY 1.8 trillion from the end of FY24, with domestic and overseas lending spreads showing improvement.

Unrealized gains on domestic equity securities increased by JPY 0.36 trillion, and the company is making steady progress towards its JPY 700 billion target for equity holdings reduction.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.