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UFJ Holdings Inc. on Tuesday tripled its group net profit forecast for the first half of the fiscal year that ended Sept. 30, thanks to strong profits from bond trading, and a tax rebate and interest from the Tokyo Metropolitan Government.

The nation’s fourth-largest banking group said it expects net profits of 180 billion yen, up threefold from a May projection for 60 billion yen in profits.

The deal cut between major banks and the metropolitan government to reduce a local tax rate has been a major windfall for banks, just as financial regulators’ pressure on them to perform well heats up.

The group headed by holding company UFJ Holdings Inc. and made up of UFJ Bank and UFJ Trust Bank, is the last of the major banking groups to announce significant hikes in its earnings outlook.

But banks still remain riddled with problem loans, hefty shareholdings and weak capital, analysts warn.

UFJ Holdings Inc. continues to drag a total of 3.99 trillion yen of problem loans on its books, which cripple the group’s risk-taking ability.

Headway has been made. The volume of problem loans is down from 4.16 trillion yen in March, and the bank says it expects to have slashed more through September.

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