Mitsubishi UFJ Financial Group, Inc.

This is our first report on one of the largest banking and financial partners, Mitsubishi UFJ Financial Group. The company had a strong last quarter as gross profits increased on a year-over-year basis. Global Markets Business Group also reported an increase in net operating profits due to portfolio rebalancing with little financial impact by offsetting loss on the sale of foreign bonds with gain on cancellation of the bear fund as well as securing earnings opportunities through flexible trading that successfully captured market fluctuations. On the other hand, Digital service profit decreased significantly in the quarter. The company plans to utilize its group-wide customer base, including Asian partner banks and Morgan Stanley, to navigate the final year of the current Medium-Term Business Plan (MTBP). As part of its expansion strategy, the company recently acquired Kanmu, renowned for its hassle-free deferred payment system, to attract younger customers. In addition, the company has been enhancing Money Canvas, its asset management platform, by incorporating products from other companies and increasing investment opportunities. Its digital asset platform, Progmat, is also set to become an independent company, expanding its functionality to include security and utility tokens, with managed assets surpassing JPY 40 billion as of April. The company is also investing in digital financial players in Asia, acquiring operations in Indonesia and the Philippines, and establishing a $100 million fund for Indonesian startups. The newly established Mars Japan aims to support Japanese startups with loan provisions, fostering the growth of globally competitive unicorn companies. In addition, plans are underway to launch a fund for European startups and another utilizing NEXI’s insurance scheme, expanding Mars initiatives globally. The firm’s FY 2022 investments in these initiatives total approximately JPY 200 billion, contributing to a cumulative investment of over JPY 400 billion, inclusive of their investment in Grab and Mars, highlighting the company’s continued strategic investments to meet diverse financial needs in Asia. We initiate coverage on the stock of Mitsubishi UFJ Financial Group, Inc. with a ‘Hold’ rating.