Record profits at Mitsubishi UFJ Financial Group Inc. and at least 26 of the nation's banks mask vanishing returns on lending in Japan that's spurring them to venture overseas.

Funding costs and administrative expenses related to operating hundreds of branches exceeded what the two largest lenders made on domestic loans and interest-earning assets in the year ended March 31.

MUFG's net income still rose 5 percent in the period, while Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. both forecast higher profits. Overseas loans for the three climbed to more than $690 billion (about ¥85 trillion), roughly the size of Switzerland's economic output.