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Mitsubishi UFJ Financial Group (NYSE:MTU) reported lower year-over-year Q1 net income on a post-merger basis. Net income fell 15.7% to 219.5 billion yen ($1.9b) due to increased taxes, nonperforming loan write-off costs and bond trading losses. Mitsubishi UFJ is maintaining its full-year financial forecast in which net income is expected to come in at 750 billion yen ($6.5b), a decrease of 36.4% against last year.

I wouldn't exactly call Mitsubishi UFJ's Q1 financials disappointing despite coming in lower than Q1 in the year prior. Actually on a comparative basis the earnings are kind of misleading since Mitsubishi and UFJ had not even merged yet (not until October). And Mitsubishi incurred heavier NPL obligations from the acquisition. On the positive side, net income at nearly 220 billion yen is nothing to complain about and overall the merger seems to be going well. One concern is the losses in bond trading. I wonder why Mitsubishi UFJ didn't reduce its exposure earlier on. There is also a concern about baby boomers shifting funds out of very low-yield savings deposit accounts into securities. In this respect I think MUFG has done well with its securities arm and has a lot of potential via its tie-up with Merrill Lynch (MER). Its interest spread and corporate lending should improve with time and future Bank of Japan rate hikes.

Ordinary shares of Mitsubishi UFJ (Tokyo: 8306) gained 0.62% to close at 1.62 million yen ($14.03 ADR equivalent) ahead of its after-hours earnings announcement. Its ADRs surged 4.76% Friday to close at $14.09).

Click here to visit Mitsubishi UFJ's investor relations web site.

See Bloomberg.com coverage of Mitsubishi UFJ's earnings click here and for a MarketWatch.com summary, click here.

Mitsubishi UFJ Financial Group (MTU) 1-year chart:



Source: Mitsubishi UFJ Q1 Earnings Lower, but Maintains Full-Year Forecast