Japan’s largest bank to finally pay taxes after a 10 year hiatus

2011年04月27日 Saidani

The Bank of Tokyo-Mitsubishi UFJ Financial Group (MUFG), Japan’s largest bank and the world’s 8th largest bank, has returned to profitability after a ten year period of losses and thus will finally add to the government’s revenue stream for the first time since 2000.

With no more cumulative losses to carry over, Bank of Tokyo-Mitsubishi UFJ is expected to pay corporate taxes for the first time since fiscal 2000, The Nikkei learned Tuesday.

Mitsubishi UFJ Financial Group Inc. (8306) has apparently exceeded its net profit forecast of 500 billion yen for fiscal 2010 by roughly 20%. Mitsubishi UFJ Trust and Banking Corp. will start paying corporate taxes again as well.

Bank of Tokyo-Mitsubishi UFJ will become the first of Japan’s three megabanks to resume corporate tax payments since they began carrying over cumulative losses from disposing of large amounts of bad loans after the economic bubble burst. Sumitomo Mitsui Financial Group Inc. (8316) and Mizuho Financial Group Inc. (8411) are expected to resume payments later because of differences in the deduction of cumulative losses. – Nikkei

This has to be rather welcome news for Japanese taxpayers who have had to shoulder the burden of financing the government (and apparently MUFG) during a period of economic stagnation and declining prospects for individual growth.

That said, the bank has not been idle during this period.  While taxpayers were finding themselves faced with higher taxes, the bank, free from such burden, was very busy.

Recent History of MUFG [pdf]

MUFG was formed in October 2005, but can trace its roots back to the 19th century. Through the changing times and against the backdrop of mergers and reorganizations, we have been consistently providing high-quality financial services to our customers.

2001 April

The Bank of Tokyo-Mitsubishi, Ltd. (BTM), The Mitsubishi Trust and Banking Corporation (Mitsubishi Trust) and Nippon Trust Bank Limited (NTB) jointly established holding company Mitsubishi Tokyo Financial Group, Inc. (MTFG) through a share exchange.

The Sanwa Bank, Limited, The Tokai Bank, Limited and The Toyo Trust and Banking Company, Limited (Toyo Trust) jointly established holding company UFJ Holdings, Inc. (UFJH) through a share exchange.

October

NTB and The Tokyo Trust Bank, Ltd. merged into Mitsubishi Trust.

2002 January

UFJ Bank Limited was created through the merger of The Sanwa Bank and The Tokai Bank.

Toyo Trust was renamed UFJ Trust Bank Limited.

September

Mitsubishi Securities Co., Ltd. was created through the merger of Tokyo-Mitsubishi Securities Co., Ltd., Tokyo-Mitsubishi Personal Securities Co., Ltd., KOKUSAI Securities Co., Ltd. and Issei Securities Co., Ltd.

2004 April

UFJH changed the status of UFJ Tsubasa Securities Co., Ltd. to a wholly owned subsidiary.

2005 October

Mitsubishi UFJ Financial Group, Inc. (MUFG) was created through the merger of MTFG and UFJH.

Mitsubishi UFJ Trust and Banking Corporation (MUTB) and Mitsubishi UFJ Securities Co., Ltd. (MUS) were created through the mergers of Mitsubishi Trust and UFJ Trust Bank and Mitsubishi Securities and UFJ Tsubasa Securities, respectively.

UFJ NICOS Co., Ltd. was created through the merger of UFJ Card Co., Ltd. and Nippon Shinpan Co., Ltd. and became a consolidated subsidiary of MUFG.

2006 January

The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) was created through the merger of the BTM and UFJ Bank.

2007 April

Mitsubishi UFJ Lease & Finance Company Limited was created through the merger of Diamond Lease Company Limited and UFJ Central Leasing Co., Ltd.

Mitsubishi UFJ NICOS Co., Ltd. was created through the merger of UFJ NICOS and DC Card Co., Ltd.

September

MUS became a wholly owned subsidiary of MUFG through a share exchange.

2008 August

Mitsubishi UFJ NICOS was made a wholly owned subsidiary of MUFG by means of a share exchange, and then MUFG transferred a portion of its shares of Mitsubishi UFJ NICOS common stock to The Norinchukin Bank.

October

MUFG and Morgan Stanley implemented their strategic and capital alliance and MUFG invested U.S. $9 billion in Morgan Stanley.

November

UnionBanCal Corporation was made a wholly owned subsidiary of BTMU.

December

ACOM was made a consolidated subsidiary of MUFG.

2010 May

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. and Morgan Stanley MUFG Securities Co., Ltd. were formed through a joint investment by MUFG and Morgan Stanley, and started operations.

Since that was published, MUFG has completed its arrangement with Morgan Stanley and promptly booked a loss of $1.7 billion.

Mitsubishi UFJ Financial Group Inc.’s brokerage alliance with Morgan Stanley lurched off at an unexpected tangent, racking up billion-dollar losses in its first year.

But fresh from sealing a partnership that gives it an even bigger stake in the Wall Street icon, Japan’s biggest bank may now be well placed to pursue its major goal in the U.S. — a place in the industry top 10, bolstered by a series of commercial banking assets, with its domestic market still sluggish and trading conditions tough.

In return for cutting a deal on shaking out the problematic brokerage, MUFG’s spruced-up partnership with Morgan Stanley leaves it with 22.4% of the voting rights in the U.S. bank, and gets two seats on the Morgan Stanley board. MUFG originally invested $9 billion in the U.S. bank during Morgan Stanley’s hour of need in the 2008 financial crisis, taking a 21% stake.

But MUFG itself isn’t interested in getting into investment banking business in the U.S., and also says it has no plans to increase its current stake in Morgan Stanley. Instead, MUFG plans to use its enhanced base in the U.S. to enhance its commercial banking interests — via acquisitions as well as greater cooperation with Morgan Stanley.

“Having an independent partner (doing investment bank business) is one condition for becoming a strong player,” Nobuyuki Hirano, deputy president of MUFG and a member of the Morgan Stanley board, said at a news conference in Tokyo Friday. The Japanese bank hopes that the strengthened strategic alliance can give it more access to companies referred on by Morgan Stanley for providing loans.

Some question exactly how much more profit can be created through stronger links. “So far, I don’t think we’ve seen a big synergy,” said Katsuhito Sasajima, analyst at JP Morgan. Still, Sasajima said, having a relationship with the U.S. giant does gives MUFG credibility and easier access to global customers.

And that comment about becoming one of America’s top ten banks?  We covered that already in our article about the incentives given to Japan’s banks by the Bank of Japan…just to ensure their continued success.  Or in the case of MUFG, to allow it to expand outside the Japanese market.

That’s quite a history for a bank that has lived off the taxpayers for ten years.  One wonders how much total help the bank has received from the government and the BOJ to be able to achieve such growth while booking losses every year during that period.

MUFG may well turn out to be an investors dream.  For those stuck in a personal taxpayer’s nightmare, however, such excesses from the bank which, through accounting sleight of hand, hasn’t shared their sacrifices is hardly a cause for celebration.

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