Yomiuri Shimbun Staff Writer

Japanese megabank Mitsubishi UFJ Financial Group Inc. (MUFG) plans to work on increasing fee income abroad and strengthening overseas asset management services as part of efforts to raise its return on equity $(ROE)$, Chief Financial Officer Jun Togawa revealed during a recent interview with The Yomiuri Shimbun.

The following is excerpted from the interview.

The Yomiuri Shimbun: What is MUFG's medium- to long-term target for ROE?

Jun Togawa: We aim to achieve an ROE of 12% without relying on gains from selling cross-held shares. We think of major U.S. financial institutions such as Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. as targets for comparison. We've set a goal of achieving the 12% mark in fiscal 2026 (ending March 2027), and that will be our starting point for setting a new medium- to long-term target. We hope to make it clear how we will raise the figure further by the end of the next medium-term business plan.

Yomiuri: How will MUFG allocate profits to things such as growth investments and shareholder returns?

Togawa: In fiscal 2025, we allocated 40% of profits to dividends and 20% to share buybacks. For fiscal 2026, we are slightly curtailing share buybacks due to a drop in our equity ratio caused by the acquisition of a stake in Shriram Finance Ltd., a major Indian non-bank financial institution.

Maintaining levels of dividends, share buybacks

Yomiuri: What are the company's future plans for share buybacks?

Togawa: Over the past three years, we have returned about 60% of profits through dividends and share buybacks. We plan to basically maintain that level, although we expect the figures to fluctuate from year to year.

Yomiuri: What challenges will you face as you try to improve ROE?

Togawa: Going forward, we want to raise ROE through digital and retail banking services and global commercial banking services, with the latter mainly targeting Asian banks.

For digital and retail banking operations, if projects like the M-tto personal financial service yield tangible results, they will also help improve the ROE of the entire group.

We are continuing to invest in the field of global commercial banking services, which we expect to see grow in the future. We expect strong growth to return in the medium to long term, led by countries such as Indonesia, the Philippines and Vietnam. In particular, the digital finance sector is poised to outpace the economic growth rates of individual countries. If certain investments underperform, we may restructure our portfolio.

Eying U.S. market

Yomiuri: Which areas does MUFG plan to put more effort into going forward?

Togawa: We want to strengthen our asset management services. We will examine what we can do in the United States, the world's largest market. Europe is also a major market, and, in consideration of compensating for MUFG's weaknesses, it could become an investment target.

Yomiuri: How much can MUFG afford to spend on acquisitions and equity investments?

Togawa: We don't set a hard limit on spending. If a deal has certain strategic value and warrants a big bet, we may make decisions that differ from our standard capital practices.

Securing recurring revenue

Yomiuri: How do you plan to enhance the profitability of MUFG's overseas operations?

Togawa: We face the challenge of having a lower asset turnover ratio than other major overseas financial institutions. Increasing net interest income -- generated from loans and other sources -- is not enough. We need to also raise fee income. In fiscal 2025, net interest income accounted for about 51% of our gross profit, whereas fee income accounted for about 40%. At most high-ROE financial institutions, these figures tend to be almost equal.

Yomiuri: Why do you think you need to raise your fee income?

Togawa: Services such as payments, credit cards, asset management and investment management can generate recurring revenue once a customer base is established. Asset management remains a primary area of focus for us. If we can increase revenue from sources that do not require heavy spending -- unlike loans -- our capital efficiency will improve, leading to a higher ROE. The public's shift from savings to investment is expanding the market, which will also serve as a key growth driver for our business.

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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.

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