Form 6-K MITSUBISHI UFJ FINANCIAL For: Nov 29

November 29, 2021 6:16 AM EST

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under

the Securities Exchange Act of 1934

For the month of November 2021

Commission File No. 000-54189

 

 

MITSUBISHI UFJ FINANCIAL GROUP, INC.

(Translation of registrant’s name into English)

 

 

7-1, Marunouchi 2-chome, Chiyoda-ku

Tokyo 100-8330, Japan

(Address of principal executive office)

 

 

Indicate by check mark whether the registrant files or

will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      X         Form 40-F                  

Indicate by check mark if the registrant is submitting the Form 6-K

in paper as permitted by Regulation S-T Rule 101(b)(1):

Indicate by check mark if the registrant is submitting the Form 6-K

in paper as permitted by Regulation S-T Rule 101(b)(7):

 

 

 

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-242048) OF MITSUBISHI UFJ FINANCIAL GROUP, INC. AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 29, 2021

 

Mitsubishi UFJ Financial Group, Inc.
By:  

/s/ Ken Aikawa

Name:   Ken Aikawa
Title:   Managing Director, Head of Documentation & Corporate Secretary Department,
  Corporate Administration Division


English Translation of Excerpts from Quarterly Securities Report Filed in Japan

This document is an English translation of selected information included in the Quarterly Securities Report for the quarter ended September 30, 2021 filed by Mitsubishi UFJ Financial Group, Inc. (“MUFG” or “we”) with the Kanto Local Financial Bureau, the Ministry of Finance of Japan, on November 29, 2021 (the “Quarterly Securities Report”). An English translation of certain information included in the Quarterly Securities Report was previously submitted in a report on Form 6-K dated November 15, 2021. Accordingly, this document should be read together with the previously submitted report.

The Quarterly Securities Report has been prepared and filed in Japan in accordance with applicable Japanese disclosure requirements as well as generally accepted accounting principles in Japan (“J-GAAP”). There are significant differences between J-GAAP and generally accepted accounting principles in the United States. In addition, the Quarterly Securities Report is intended to update prior disclosures filed by MUFG in Japan and discusses selected recent developments in the context of those prior disclosures. Accordingly, the Quarterly Securities Report may not contain all of the information that is important to you. For a more complete discussion of the background to information provided in the Quarterly Securities Report disclosure, please see our annual report on Form 20-F for the fiscal year ended March 31, 2021 and other reports filed with or submitted to the U.S. Securities and Exchange Commission by MUFG.

The following disclosure contains forward-looking statements, which, unless specifically stated otherwise, reflects our understanding as of the date of filing of the Quarterly Securities Report. Actual results may significantly differ from those expressed or implied by such forward-looking statements. In addition, although the Risk Committee identified the top risks below, there may be other material risks that emerge as we operate our businesses.

Risks Relating to Our Business

We describe below some major developments and changes to update our risk factor disclosure previously included in our annual securities report for the fiscal year ended March 31, 2021 filed in Japan on June 29, 2021. The updates below are not a complete update of the prior disclosure, but instead intended to explain only the significant developments and changes that we believe may have a material impact on the risks to our business and other risks. The discussion below contains forward-looking statements, which, unless specifically described otherwise, reflect our understanding as of the date of filing of the Quarterly Securities Report.

We determine the significance of various risk scenarios based on their impact and probability and identify potential risk events that are deemed to require close monitoring and attention for the next one-year period as top risks. The main top risks identified by our Risk Committee in October 2021 are as follows. By identifying these top risks, we seek to implement necessary risk management measures designed to minimize such risks to the extent possible and manage them in such a manner that they can be agilely dealt with in the event that they materialize. In addition, through management’s participation in discussions on such top risks, we strive to take effective measures based on a shared assessment of risks.

Main Top Risks

 

Risk events    Risk scenarios

A decline in profitability

(including a decline in net interest income)

  

•  Our overall profitability may be adversely affected by, among other things, a decline in our net interest income due to further reductions in interest rates as a result of changes in the monetary policies of central banks in various jurisdictions in light of the COVID-19 pandemic and deterioration in global economic conditions.

Foreign currency liquidity risk   

•  Deterioration in market conditions may result in a depletion of foreign currency funding liquidity and an increase in our foreign currency funding costs.

An increase in credit costs   

•  Sudden deterioration in global economic activities may result in an increase in our credit costs.

•  Deterioration in the credit quality of particular industries or counterparties, to which we have relatively larger exposures, may result in an increase in our credit costs.

IT risk   

•  Cyber-attacks may result in customer information leakage, suspension of our services, and reputational damage.

•  System problems may result in our payment of financial compensation and damage to our reputation.

Risks relating to external circumstances or events (such as health pandemics, earthquakes, floods, terrorism and other political and social conflicts)   

•  Health pandemics, natural disasters, conflicts and terrorist attacks may result in disruption to all or part of our operations or an increase in costs and expenses in addressing such circumstances or events.

Risks relating to climate changes   

•  If our efforts to address climate change-related risks or to make appropriate disclosure are deemed insufficient, our corporate value may be impaired.

•  Our credit portfolio may be adversely affected by the negative impact of climate change on our borrowers and transaction counterparties.

 

*

These risk events are among the risk events that were reported to MUFG’s Board of Directors following the Risk Committee’s discussion in October 2021. These risk events include risk events of general applicability.

 

1


15.

Risks of being deemed to have engaged in inappropriate or illegal practices or other conduct and, as a result, becoming subject to regulatory actions

We conduct our business subject to laws, regulations, rules, policies and voluntary codes of practice in Japan and other markets where we operate. We are subject to various regulatory inquiries or investigations from time to time in connection with various aspects of our business and operations. Our compliance risk management systems and programs, which are continually enhanced, may not be fully effective in preventing all violations of laws, regulations and rules.

If we are deemed not compliant with applicable laws, regulations or rules, including those relating to money laundering, economic sanctions, bribery, corruption, financial crimes, or other inappropriate or illegal transactions, if our conduct is deemed to constitute unfair or inappropriate business practices, or if we are deemed to have failed to meet market or industry rules or standards, customer protection requirements, or corporate behavior expectations, we may become subject to penalties, fines, public reprimands, reputational damage, issuance of business improvement, suspension or other administrative orders, or withdrawal of authorization to operate. These consequences may result in loss of customer or market confidence in us or otherwise may adversely affect our financial condition and results of operations. Our ability to obtain regulatory approvals for future strategic initiatives may also be adversely affected.

In November 2017, MUFG Bank agreed to the entry by the U.S. Office of the Comptroller of the Currency, or OCC, of a consent order that included remedial terms and conditions that were substantively the same as those included in the consent agreements that MUFG Bank had reached with the New York Department of Financial Services in 2013 and 2014 pertaining to compliance with OFAC sanctions requirements. The consent order was a condition for the conversion of MUFG Bank’s branches and agencies in the United States from state-licensed branches and agencies under the supervision of state regulatory agencies to federally licensed branches and agencies under the supervision of the OCC. In July 2021, the OCC terminated the November 2017 consent order pertaining to MUFG Bank’s compliance with OFAC sanctions requirements.

In February 2019, MUFG Bank entered into a consent order with the OCC, relating to deficiencies identified by the OCC in the Bank Secrecy Act/Anti-Money Laundering compliance program of MUFG Bank’s U.S. branches in New York, Los Angeles, and Chicago. The consent order requires MUFG Bank and its U.S. branches to implement various remedial measures to address the deficiencies found in the OCC examination, including a comprehensive action plan satisfactory to the OCC, implementation of measures to ensure effective compliance management and qualified staffing, the adoption of comprehensive Bank Secrecy Act/Anti-Money Laundering risk assessment policies and procedures, and other remedial actions. MUFG Bank is undertaking necessary actions relating to the consent order.

We have received requests and subpoenas for information from government agencies in some jurisdictions that are conducting investigations into past submissions made by panel members, including us, to the bodies that set various interbank benchmark rates as well as investigations into foreign exchange related practices of global financial institutions. Some of the investigations into foreign exchange related practices resulted in our payment of monetary penalties to the relevant government agencies. We are cooperating with the ongoing investigations and have been conducting an internal investigation, among other things. In connection with these matters, we and other financial institutions are involved as defendants in a number of civil lawsuits, including putative class actions, in the United States.

These developments or other similar events, including potential additional regulatory actions against us, agreements to make significant additional settlement payments, may result in significant adverse financial and other consequences to us.

 

22.

Risks relating to the sale of MUFG Union Bank, N.A.

MUFG and MUFG Bank, a core banking subsidiary of MUFG, announced on September 21, 2021 that we agreed with U.S. Bancorp (USB) to the sale of all shares in MUFG Union Bank, N.A. (MUB), MUFG’s subsidiary owned through MUFG Americas Holdings, and have entered into a Share Purchase Agreement.

Although the transfer of the MUB shares (the Share Transfer) is expected to be effective in the first half of calendar year 2022, the completion of the Share Transfer is subject to certain conditions precedent, including the approval from relevant regulators. If these conditions precedent are not satisfied or if there is any unexpected delay in satisfaction of these conditions precedent, the Share Transfer may not be completed as we currently expect.

The MUB businesses that MUFG will transfer to USB through the Share Transfer exclude the GCIB (Global Corporate & Investment Banking) business, the Global Markets business to the extent related to the GCIB business (transactions with clients and investors) that is currently run by MUB, and certain assets and liabilities, etc. that are part of shared middle and back office functions, etc. Such businesses, and the customer assets and liabilities, etc. related to these businesses (including related transactions with such customers), are planned to be transferred to MUFG Bank’s U.S. branches or affiliates prior to the Share Transfer. In addition, both MUFG and USB plan to enter into a Transitional Service Agreement (TSA) and a Reverse Transitional Service Agreement (RTSA) with an aim for both companies to be able to collaborate to smoothly continue MUB’s current customer transactions by MUB and/or MUFG Bank even after the Transaction and to provide even higher quality financial services. These planned business transfer and provision of services under the TSA and the RTSA are expected to require implementation of multiple complex measures in a short period of time and, especially with respect to systems, require, among other things, provision of assistance to USB in integrating certain systems and preparation for sharing certain systems with USB. These requirements are expected to impose various burdens on the MUFG Group. Such burdens on the MUFG Group may be greater than currently expected due to unanticipated future developments.

If the Share Transfer is not completed as planned by MUFG, including for any of the reasons described above, or if our actual costs and other requirements in connection with the Share Transfer exceed our current expectations, our business strategies, financial condition and results of operations may be adversely affected.

 

2


Additional Japanese GAAP Financial Information for the Six Months Ended September 30, 2021

Consolidated Statements of Cash Flows

 

     (in millions of yen)  
     For the six months
ended
September 30, 2020
    For the six months
ended
September 30, 2021
 

Cash flows from operating activities:

    

Profits before income taxes

     572,619       1,055,941  

Depreciation and amortization

     166,795       169,579  

Impairment losses

     17,489       21,484  

Amortization of goodwill

     8,209       8,896  

Equity in losses (gains) of equity method investees

     (153,190     (218,377

Increase (decrease) in allowance for credit losses

     109,228       (126,418

Increase (decrease) in reserve for bonuses

     (22,234     (21,967

Increase (decrease) in reserve for bonuses to directors

     (509     (874

Increase (decrease) in reserve for stock payment

     (1,919     (3,499

Decrease (increase) in net defined benefit assets

     (34,824     (48,071

Increase (decrease) in net defined benefit liabilities

     2,065       2,766  

Increase (decrease) in reserve for retirement benefits to directors

     (265     (110

Increase (decrease) in reserve for loyalty award credits

     1,770       895  

Increase (decrease) in reserve for contingent losses

     (12,432     (18,626

Interest income recognized on statement of income

     (1,438,090     (1,260,434

Interest expenses recognized on statement of income

     471,680       268,052  

Losses (gains) on securities

     (233,536     (229,957

Losses (gains) on money held in trust

     27,036       341  

Foreign exchange losses (gains)

     588,757       (170,452

Losses (gains) on sales of fixed assets

     (9,188     (12,840

Net decrease (increase) in trading assets

     (1,465,415     1,195,049  

Net increase (decrease) in trading liabilities

     299,873       (2,072,843

Adjustment of unsettled trading accounts

     1,074,657       338,816  

Net decrease (increase) in loans and bills discounted

     185,608       3,589,364  

Net increase (decrease) in deposits

     14,570,028       (266,912

Net increase (decrease) in negotiable certificates of deposit

     285,387       835,836  

Net increase (decrease) in borrowed money (excluding subordinated borrowings)

     4,724,428       (1,057,360

Net decrease (increase) in call loans and bills bought and others

     9,945,377       2,371,538  

Net decrease (increase) in receivables under securities borrowing transactions

     208,538       39,549  

Net increase (decrease) in call money and bills sold and others

     (4,676,691     237,981  

Net increase (decrease) in commercial papers

     (268,573     (247,504

Net increase (decrease) in payables under securities lending transactions

     (197,297     (20,023

Net decrease (increase) in foreign exchanges (assets)

     22,192       25,988  

Net increase (decrease) in foreign exchanges (liabilities)

     (325,644     (142,727

Net increase (decrease) in short-term bonds payable

     (223,995     (13,997

Net increase (decrease) in issuance and redemption of unsubordinated bonds payable

     234,843       216,155  

Net increase (decrease) in due to trust accounts

     (82,503     (531,577

Interest income (cash basis)

     1,519,898       1,295,774  

Interest expenses (cash basis)

     (515,879     (275,786

Others

     (248,108     421,324  
  

 

 

   

 

 

 

Sub-total

     25,126,185       5,354,972  
  

 

 

   

 

 

 

Income taxes

     (94,554     (136,690

Refund of income taxes

     89,198       35,591  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     25,120,829       5,253,874  
  

 

 

   

 

 

 

 

3


     (in millions of yen)  
     For the six months
ended
September 30, 2020
    For the six months
ended
September 30, 2021
 

Cash flows from investing activities:

    

Purchases of securities

     (53,348,734     (53,498,281

Proceeds from sales of securities

     23,966,758       37,451,905  

Proceeds from redemption of securities

     20,185,855       12,688,923  

Payments for increase in money held in trust

     (522,884     (506,437

Proceeds from decrease in money held in trust

     414,270       482,635  

Purchases of tangible fixed assets

     (55,546     (49,118

Purchases of intangible fixed assets

     (128,417     (140,866

Proceeds from sales of tangible fixed assets

     19,243       51,639  

Proceeds from sales of intangible fixed assets

     6       374  

Payments for acquisition of businesses

     (520     —    

Proceeds from transfer of businesses

     —         6,081  

Payments for acquisition of subsidiaries’ equity affecting the scope of consolidation

     (20,285     —    

Proceeds from sales of subsidiaries’ equity affecting the scope of consolidation

     —         2,814  

Others

     (945     (1,099
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (9,491,200     (3,511,428
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Repayments of subordinated borrowings

     (16,000     —    

Proceeds from issuance of subordinated bonds payable and bonds with warrants

     212,000       149,445  

Payments for redemption of subordinated bonds payable and bonds with warrants

     (252,386     (398,187

Proceeds from issuance of common stock to non-controlling shareholders

     1,662       2,132  

Repayments to non-controlling shareholders

     (23     —    

Dividends paid by MUFG

     (160,875     (160,818

Dividends paid by subsidiaries to non-controlling shareholders

     (10,328     (15,101

Purchases of treasury stock

     (4     (8,505

Proceeds from sales of treasury stock

     2,125       5,393  

Payments for purchases of subsidiaries’ equity not affecting the scope of consolidation

     —         (43

Proceeds from sales of subsidiaries’ equity not affecting the scope of consolidation

     3,275       —    
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (220,555     (425,684
  

 

 

   

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

     (227,301     293,032  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     15,181,771       1,609,794  
  

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     78,335,634       102,980,711  
  

 

 

   

 

 

 

Decrease in cash and cash equivalents resulting from absorption via corporate separation

     —         (30
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period

     93,517,405       104,590,474  
  

 

 

   

 

 

 

 

4


Additional Japanese GAAP Financial Information for the Six Months Ended September 30, 2021

 

1.

Significant Accounting Policies Applied to the Semi-Annual Consolidated Financial Statements

 

  I.

Scope of consolidation

 

  (1)

Number of consolidated subsidiaries: 250

Principal companies:

MUFG Bank, Ltd.

Mitsubishi UFJ Trust and Banking Corporation

Mitsubishi UFJ Securities Holdings Co., Ltd.

Mitsubishi UFJ NICOS Co., Ltd.

ACOM CO., LTD.

 

  (a)

Changes in the scope of consolidation in the six months ended September 30, 2021

Mitsubishi UFJ Capital 8, Limited Partnership and two other companies were newly included in the scope of consolidation due to new establishment.

PT U Finance Indonesia and ten other companies were excluded from the scope of consolidation due to the sale of shares or other reasons.

 

  (2)

Non-consolidated subsidiaries:

 

  ACOM

(M) SDN. BHD.

ACOM (M) SDN. BHD. was excluded from the scope of consolidation due to its insignificance in light of its assets, ordinary income, net income (to the extent of MUFG’s equity position) and retained earnings (to the extent of MUFG’s equity position) and other factors. Its exclusion from the scope of consolidation would not impede reasonable judgment as to the financial condition or performance of the MUFG group.

 

  (3)

Entities not regarded as subsidiaries even though Mitsubishi UFJ Financial Group, Inc. (“MUFG”) owns the majority of voting rights in its own account:

Hygeia Co., Ltd.

A&M Drug Development, LLC

OiDE BetaRevive, Inc.

ARM Drug Development G.K.

OiDE OptoEye,Inc.

HISHOH Biopharma Co., Ltd.

 

  (a)

Reasons for excluding from the scope of consolidation

These entities were not treated as subsidiaries because they were established as property management agents for land trust projects without any intent to control, or because MUFG’s consolidated venture capital subsidiaries owned the majority of voting rights primarily to benefit from the appreciation of their investments resulting from growth or restructuring of the investees’ businesses without any intent to control.

 

  II.

Application of the equity method

 

  (1)

Number of non-consolidated subsidiaries accounted for under the equity method: None

 

  (2)

Number of equity method affiliates: 53

Principal companies:

Mitsubishi HC Capital Inc.

Morgan Stanley

 

  (a)

Changes in the scope of application of the equity method in the six months ended September 30, 2021

Cotra Ltd. and one other company were newly included in the scope of application of the equity method due to new establishment.

Southern California Business Development Corporation was excluded from the scope of application of the equity method due to liquidation.

In addition, Hitachi Capital Corporation was excluded from the scope of application of the equity method due to an absorption-type merger with Mitsubishi UFJ Lease & Finance Company Limited.

Mitsubishi UFJ Lease & Finance Company Limited changed its company name to Mitsubishi HC Capital Inc. as of April 1, 2021.

 

5


  (3)

Number of non-consolidated subsidiaries not accounted for under the equity method:

ACOM (M) SDN. BHD.

ACOM (M) SDN. BHD. was excluded from the scope of application of the equity method due to its insignificance in light of its net income (to the extent of MUFG’s equity position) and retained earnings (to the extent of MUFG’s equity position) and other factors. Its exclusion from the scope of application of the equity method would not have a material effect on the semi-annual consolidated financial statements.

 

  (4)

Number of affiliates not accounted for under the equity method: None

 

  (5)

Entities not regarded as affiliates in which MUFG owns 20% to 50% of their voting rights in its own account:

Hirosaki Co., Ltd.

AKITAYA Co., Ltd.

Fun Place Co., Ltd.

Shonai Paradiso Co., LTD

Kamui Pharma Co., Ltd.

GEXVal Inc.

Reborna Biosciences, Inc.

Alchemedicine, Inc.

HuLa immune Inc.

Verification Technology, Inc.

DT Axis, Inc.

 

  (a)

Reasons for excluding from the scope of affiliates

These entities were not regarded as affiliates because MUFG’s consolidated venture capital subsidiaries owned 20% to 50% of voting rights primarily to benefit from the appreciation of their investments resulting from growth or restructuring of the investees’ businesses without any intent to control.

 

  III.

Semi-annual balance sheet dates of consolidated subsidiaries

 

  (1)

The semi-annual balance sheet dates of the consolidated subsidiaries were as follows:

 

The end of February:

         1 subsidiary   

The end of April:

         1 subsidiary   

The end of June:

     169 subsidiaries   

The end of September:

       77 subsidiaries   

The end of October:

         1 subsidiary   

The end of December:

         1 subsidiary   

 

  (2)

A subsidiary whose semi-annual balance sheet date is the end of February was consolidated based on its preliminary financial statements as of the end of August.

A subsidiary whose semi-annual balance sheet date is the end of April was consolidated based on its preliminary financial statements as of the end of July.

A subsidiary whose semi-annual balance sheet date is the end of October was consolidated based on its preliminary financial statements as of the end of June.

A subsidiary whose semi-annual balance sheet date is the end of December was consolidated based on its preliminary financial statements as of the end of June.

The remaining subsidiaries were consolidated based on their financial statements as of their respective semi-annual balance sheet dates.

Adjustments were made to the consolidated financial statements to reflect any significant transactions within the consolidated group that occurred between the semi-annual balance sheet dates of the relevant subsidiaries and the semi-annual consolidated balance sheet date.

 

6


  IV.

Accounting policies

 

  (1)

Trading assets and Trading liabilities; Trading income and expenses

Transactions involving short-term fluctuations or arbitrage opportunities in interest rates, currency exchange rates, market prices of financial instruments or other market indices (“trading purposes”) are presented in “Trading assets” and “Trading liabilities” on the consolidated balance sheet on a trade-date basis, and gains and losses from trading transactions (interest and dividends, gains or losses on sales and gains or losses on valuation) are presented in “Trading income” and “Trading expenses” on the consolidated statement of income.

Trading assets and trading liabilities are stated at fair value as of the consolidated balance sheet date.

With respect to derivative transactions for trading purposes, specific market risk and counterparty credit risk exposures are measured in groups of trading assets and trading liabilities, and fair value is determined for each such group of trading assets and trading liabilities on a net basis.

 

  (2)

Securities

 

  (a)

Debt securities being held to maturity are stated at amortized cost (using the straight-line method) computed using the moving-average method. Available-for-sale securities are stated at their quoted market prices (cost of securities sold is calculated primarily using the moving-average method), and equity securities with no quoted market price available are stated at acquisition cost computed using the moving-average method.

Net unrealized gains (losses) on available-for-sale securities are included directly in net assets, net of applicable income taxes, except in the case of application of the fair value hedge accounting method, in which the change in the fair value recognized is recorded in current earnings.

 

  (b)

Securities included in trust assets in money held in trust are accounted for on the same basis as noted above in Notes (1) and (2)(a).

Net unrealized gains (losses) on securities in money held in trust which are not held for trading purposes or held to maturity are included directly in net assets, net of applicable income taxes.

 

  (3)

Derivatives

Derivative transactions (excluding those for trading purposes) are stated at fair value as of the consolidated balance sheet date. With respect to derivative transactions for trading purposes, specific market risk and counterparty credit risk exposures are measured in groups of trading assets and trading liabilities, and fair value is determined for each such group of trading assets and trading liabilities on a net basis.

 

  (4)

Depreciation and amortization of fixed assets

 

  (a)

Tangible fixed assets (except for lease assets)

Depreciation of tangible fixed assets of MUFG and its domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries is computed using the declining-balance method, and is recorded by allocating the estimated annual depreciation amount evenly to each reporting period. The useful lives are primarily estimated as follows:

Buildings: 15 to 50 years

Equipment: 2 to 20 years

Depreciation of tangible fixed assets of other consolidated subsidiaries is computed primarily using the straight-line method based on their estimated useful lives and other factors.

 

  (b)

Intangible fixed assets (except for lease assets)

Amortization of intangible fixed assets is computed using the straight-line method.

Development costs for internally used software are amortized using the straight-line method over the estimated useful lives of primarily 3 to 10 years.

 

7


  (c)

Lease assets

Depreciation or amortization of lease assets in “Tangible fixed assets” or “Intangible fixed assets” under finance leases other than those that are deemed to transfer the ownership of leased property to the lessees is computed using the straight-line method over the lease periods with zero residual value unless residual value is guaranteed by the corresponding lease contracts, in which case the residual value equals the guaranteed amount.

 

  (5)

Deferred assets

Bond issuance costs and stock issuance costs are expensed as incurred.

 

  (6)

Allowance for credit losses

Principal domestic consolidated subsidiaries determine the amount of allowance for credit losses in accordance with the internal standards for self-assessment of asset quality and the internal standards for write-offs and provisions.

For claims on borrowers that have entered into bankruptcy, special liquidation proceedings or similar legal proceedings or whose notes have been dishonored and suspended from processing through clearing houses (“bankrupt borrowers”) or borrowers that are not legally or formally bankrupt but are regarded as substantially in similar condition (“virtually bankrupt borrowers”), allowances are provided based on the amount of claims, after the write-offs as stated below, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on borrowers that are not yet legally or formally bankrupt but deemed to have a high possibility of becoming bankrupt (“likely to become bankrupt borrowers”), where the amounts of principal repayments and interest payments cannot be reasonably estimated from the borrowers’ cash flows, allowances are provided based on an overall solvency assessment of the claims, net of expected amounts to be collected through the disposal of collateral and the execution of guarantees.

For claims on likely to become bankrupt borrowers and claims on borrowers requiring close monitoring, where the amounts of principal repayments and interest payments can be reasonably estimated from the borrowers’ cash flows, allowances are provided in an amount equal to the difference between the book value of the claims and the relevant cash flows discounted by the initial contractual interest rates.

For other claims, allowances are provided based mainly on expected losses for the immediately following one-year period or the average remaining term to maturity of loans. Expected losses are calculated by applying a loss rate, which is obtained based on the average rate of historical credit loss experience or historical default probability experience over a certain period, which is derived from actual credit losses or actual defaults over a one-year period or over a period equal to the average remaining term to maturity of loans, with necessary adjustments for future loss projections and other factors.

For claims originated in certain foreign countries, additional allowances are provided based on an assessment of political and economic conditions of these countries.

All claims are assessed by the relevant branches and the credit supervision departments in accordance with the internal standards for self-assessment of asset quality. The credit review department, which is independent from those operating sections, subsequently audits these assessments.

For claims on bankrupt borrowers and virtually bankrupt borrowers, the amount of claims exceeding the estimated value of collateral and guarantees, which is deemed uncollectible, is written off. The total amount of write-offs was ¥278,747 million as of September 30, 2021 (¥298,281 million as of March 31, 2021).

Consolidated subsidiaries not adopting the procedures stated above provide for allowances based on their historical credit loss experience or other factors for collectively assessed claims and based on individual assessments of the possibility of collection for specific deteriorated claims.

 

8


(Additional information)

(Allowance for credit losses of certain overseas subsidiaries which apply Generally Accepted Accounting Principles in the United States (“U.S. GAAP”))

Certain overseas subsidiaries which apply U.S. GAAP have adopted U.S. Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments” and provide for allowance for credit losses by estimating credit losses currently expected for the remaining term of the relevant contract. Expected credit losses are calculated collectively for each portfolio of loans with similar risk characteristics based on the loss rates derived from past credit loss experience or bankruptcy experience through the application of a model that incorporates future forecast information, such as macroeconomic variables, into the probability of bankruptcy, etc. In addition, adjustments are made in the calculation of allowance for credit losses for qualitative factors relating to current conditions and future forecasts which may not be sufficiently captured in such model but should be appropriately taken into account. Future uncertainties due to the impact of the COVID-19 pandemic are factored into estimates for the credit loss provisioning through such adjustments based on macroeconomic variables and/or qualitative factors.

With respect to loan assets with deteriorated credit risk that are deemed not to entail risks in common with other loan assets, allowance for credit losses is recognized individually for each loan asset based on risks that are particular to the asset. This credit loss provisioning is done through certain methodologies, including calculating the difference between the carrying amount of the loan asset and the amount of estimated cash flows from the loan asset discounted by the effective interest rate as well as using the fair value of the collateral for the loan asset.

(Estimated impact of the COVID-19 pandemic relating to allowance for credit losses)

The process of calculating allowance for credit losses in our principal consolidated domestic banking subsidiaries involves various estimates such as determination of counterparty credit ratings which are based on evaluation and classification of counterparties’ debt-service capacity, assessment of the value of collateral provided by borrowers, and adjustments for future loss projections and other factors to the loss rates calculated based on historical credit loss experience.

Among these, internal credit ratings are assigned to counterparties based on qualitative factors such as the current and expected future business environment of the industry to which they belong as well as their management and funding risks in addition to quantitative financial evaluations through an analysis of their financial results. In particular, the COVID-19 pandemic has had a significant impact on the financial position and operating results of certain counterparties. Determination of internal credit ratings for these counterparties may be highly dependent on our assessment of the prospects of improvements in their operating results and their ability to continue as going concerns.

When calculating allowance for credit losses, MUFG Bank, Ltd., our principal consolidated domestic banking subsidiary, determines expected loss rates primarily by calculating a rate of loss based on a historical average of the credit loss rate or a historical average of the default probability derived from actual credit loss experience or actual bankruptcy experience and making necessary adjustments based on future projections and other factors. When making adjustments based on future loss projections and other factors to loss rates calculated based on historical loss experience, the subsidiary takes into account the rate of increase in the credit loss rate or the default probability in a more recent period, especially in light of the deterioration in the economic environment under the COVID-19 pandemic. The amount of impact of these adjustments was ¥5,148 million for the six months ended September 30, 2021 (¥30,846 million for the fiscal year ended March 31, 2021).

In addition, certain overseas subsidiaries which apply U.S. GAAP have adopted ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” and provide for allowance for credit losses by estimating credit losses currently expected for the remaining term of the relevant contracts. Expected credit losses are calculated using a quantitative model that reflects economic forecast scenarios based on macroeconomic variables. The calculation process includes determination of macroeconomic variables used in multiple economic forecast scenarios and the weightings applied to each economic forecast scenario. Expected credit losses are adjusted for qualitative factors to compensate for expected credit losses that are not reflected in a quantitative model.

Significant assumptions used in our calculation of allowance for credit losses, including those described above, are subject to uncertainty. In particular, certain counterparties’ prospects of improvements in their operating results and expectations as to their ability to continue as going concerns, and adjustments to the rate of loss calculated based on actual experience for future projections and other factors, as well as determination of the macroeconomic variables used in, and the weightings applied to, multiple economic forecast scenarios, and adjustments thereto for qualitative factors, by certain subsidiaries which apply U.S. GAAP, are based on estimation relating to the economic environment, including the outlook relating to the COVID-19 pandemic, with respect to which objective data are not readily available. The outlook relating to the COVID-19 pandemic, which is expected to further impact our counterparties’ operating environment and the economic environment, remains subject to significant uncertainty. Accordingly, we make certain assumptions, including that the pace of future economic recovery would be generally gradual, although the pace may vary from country to country, as balancing economic activity and pandemic control continues. The recorded allowance for credit losses represents our best estimation made in a manner designed to ensure objectivity and rationality.

 

9


For the six-month period ended September 30, 2021, the assumptions for making estimates relating to allowance for credit losses remained substantially unchanged because the observable changes subsequent to the end of the previous fiscal year in the factors and circumstances underlying the assumptions were not sufficiently significant to cause such change in the assumptions. However, these assumptions are highly uncertain, and significant additional provision for credit losses may be recognized for the nine-month period ending December 31, 2021 and subsequent reporting periods due to developments affecting the impact of the COVID-19 pandemic on the financial performance of counterparties or on the economic environment.

 

  (7)

Reserve for bonuses

Reserve for bonuses, which is provided for future bonus payments to employees, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

  (8)

Reserve for bonuses to directors

Reserve for bonuses to directors, which is provided for future bonus payments to directors, is recorded in the amount deemed to have accrued based on the estimated amount of bonuses as of the consolidated balance sheet date.

 

  (9)

Reserve for stocks payment

Reserve for stocks payment, which is provided for future payments of compensation under the stock compensation plan for directors and officers of MUFG and certain domestic consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of compensation as of the consolidated balance sheet date.

 

  (10)

Reserve for retirement benefits to directors

Reserve for retirement benefits to directors, which is provided for future payments of retirement benefits to directors of consolidated subsidiaries, is recorded in the amount deemed to have accrued based on the estimated amount of benefits as of the consolidated balance sheet date.

 

  (11)

Reserve for loyalty award credits

Reserve for loyalty award credits, which is provided for the future redemption of points awarded to customers through Super IC Cards, etc., is calculated by estimating the amount that will be redeemed in the future based on the monetary amount converted from the awarded but unused points, and is recorded in the appropriate amount as a reserve.

 

  (12)

Reserve for contingent losses

Reserve for contingent losses, which is provided for possible losses from contingent events related to off-balance sheet transactions and various litigation and regulatory matters, is calculated by estimating the impact of such contingent events. This reserve also includes future claims for repayment of excess interest payments on consumer loans that are estimated based on the past repayments, the pending claims and other factors.

 

  (13)

Reserves under special laws

Reserves under special laws represent the reserves for contingent liabilities from derivative financial instruments transactions executed for clients, which are recorded in accordance with Article 46-5-1 of the Financial Instruments and Exchange Law and Article 175 of the Cabinet Office Ordinance on Financial Instruments Business.

 

  (14)

Retirement benefits

In calculating the amount of benefit obligation, the portion of projected benefit obligation attributed to the six-month period ended September 30, 2021 is determined using the benefit formula basis.

Prior service cost is amortized using the straight-line method over a fixed period, primarily over 10 years, within the employees’ average remaining service period.

Net actuarial gains (losses) are amortized using the straight-line method over a fixed period, primarily over 10 years, within the employees’ average remaining service period, primarily beginning in the subsequent fiscal year after such gains (losses) are recognized.

For certain overseas branches of domestic consolidated subsidiaries and certain consolidated subsidiaries, net defined benefit liability and retirement benefit expenses are calculated using the simplified method.

 

10


  (15)

Revenue Recognition

 

  (a)

Revenue recognition

Revenues arising from contracts with customers are recognized in the consolidated statements of income based on the status of fulfillment of the performance obligations identified in each contract, depending on the actual nature of the transactions under the contract.

 

  (b)

Revenue Recognition for Principal Categories of Transactions

Revenue arising from contracts with customers is recognized using a method that is designed to closely reflect economic reality, with the timing of fulfillment of performance obligations, which is an important factor in determining the timing of revenue recognition, assessed as described below.

In most cases, the consideration for a transaction is settled in cash at the time of the transaction. In other cases, receivables recognized in connection with transactions are generally collected within one year.

Of the fees and commissions, those on remittances and transfers consist mainly of remittance and transfer fees and are recognized as revenue at the time of settlement.

Of the fees and commissions, those on deposits consist mainly of ATM usage fees and periodic account management service fees. ATM usage fees are recognized as revenue at the time of execution of transactions, and periodic account management service fees are recorded as revenue over the service period.

Of the fees and commissions, those on loans consist mainly of the consideration for administration and management services during the tenors of syndicated loans and the consideration for financial and financing advice to clients, and are recorded as revenue over the service period.

Of the fees and commissions, those on trust-related services consist mainly of the consideration for shareholder registry administration services for issuers of stocks, real estate brokerage and appraisal services, and succession services including preparation, maintenance and execution of wills and inheritance management. These fees and commissions are recognized as revenue at the time when the services are provided.

Of the fees and commissions, those on securities-related services consist mainly of fees related to sales and transfers of securities including investment trust, underwriting, brokerage and advisory services, fees related to securitization, and agent fees related to calculation and payment of dividends. Fees on securities-related services are recorded as revenue over the relevant service period. Fees arising from securities-related services that are consumed by a client at a point in time (e.g., sales and transfers of securities executed under the direction of clients, underwriting or securitization of bonds and equity securities which is completed on the date of the transaction, provision of advice to clients, and calculation and payment to investors of dividends) are recognized as revenue at such point in time. Fees arising from securities-related services that are used by a client at equal intervals over the service period (e.g., retainer fees for M&A advisory services) are recognized as revenue over such service period. Fees to be paid when a particular performance target is achieved (e.g., success fees for M&A advisory services) are recognized as revenue at the time when such performance target is achieved.

Of the fees and commissions, those on credit card business consist mainly of credit card merchant fees and royalty fees from franchised merchants. Merchant fees are recorded as revenue at the time when the credit sale data is received, and royalty fees from franchised merchants are recorded as revenue over the service period.

Of the fees and commissions, those on administration and management services for investment funds and investment advisory services arise mainly from asset management and investment advisory services and consist of asset management fees, success fees and investment advisory fees related to investment trusts. Asset management fees and investment advisory fees are recognized as revenue as MUFG’s performance obligations are satisfied over the service period in the amount MUFG is entitled to charge based on the balance of assets under management. Performance-based success fees are recognized as revenue at the time when performance targets are met and it is deemed highly likely that there will be no material reversal of the recognized revenue.

Trust fees consist mainly of fees on administration and management of trust assets and are recognized as revenue as MUFG’s performance obligations are satisfied over the service period in the amount MUFG is entitled to charge based generally on the balance of assets under management for each trust or the performance of each trust account for an accounting period.

 

  (16)

Translation of assets and liabilities denominated in foreign currencies

Assets and liabilities denominated in foreign currencies or booked at overseas branches of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries are translated into yen primarily at exchange rates prevailing at the consolidated balance sheet date, except for investments in non-consolidated affiliates which are translated into yen at exchange rates prevailing at the acquisition dates.

Assets and liabilities denominated in foreign currencies of other consolidated subsidiaries are translated into yen at exchange rates prevailing at the respective balance sheet date.

 

11


  (17)

Leasing transactions

(As Lessees)

Domestic consolidated subsidiaries’ finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to purchases, and depreciation of lease assets is computed using the straight-line method over the lease term with zero residual value unless residual value is guaranteed by the corresponding lease contracts, in which case the residual value equals the guaranteed amount.

(As Lessors)

Finance leases other than those that are deemed to transfer the ownership of leased property to the lessees are accounted for in a similar way to sales and income and expenses related to such leases are recognized by allocating interest equivalents to applicable fiscal periods instead of recording sales as “Other ordinary income.”

 

  (18)

Hedge accounting

 

  (a)

Hedge accounting for interest rate risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging transactions to hedge interest rate risks arising from financial assets and liabilities, except for certain transactions qualifying for special hedge accounting treatment of interest rate swaps. Portfolio hedging or individual hedging, as described in the Japanese Institute of Certified Public Accountants (“JICPA”) Industry Committee Practical Guidelines No. 24, “Treatment of Accounting and Auditing of Application of Accounting Standard for Financial Instruments in Banking Industry” (October 8, 2020), and JICPA Accounting Committee Report No. 14, “Practical Guidelines for Accounting for Financial Instruments” (January 31, 2000), is primarily applied to determine hedged items.

With respect to hedging transactions to offset fluctuations in the fair value of fixed rate deposits, loans and other instruments, hedging instruments (e.g., interest rate swaps) are designated to hedged items individually or collectively by their maturities in accordance with JICPA Industry Committee Practical Guidelines No. 24. With respect to hedging transactions to offset fluctuations in the fair value of fixed rate bonds classified as available-for-sale securities, hedging instruments (e.g., interest rate swaps) are designated to hedged items collectively by the type of bond. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms.

With respect to hedging transactions to fix the cash flows of forecasted transactions related to floating rate deposits, loans and other instruments as well as forecasted transactions related to short-term fixed rate deposits, loans and other instruments, hedging instruments (e.g., interest rate swaps) are designated to hedged items collectively by interest rate indices and tenors in accordance with JICPA Industry Committee Practical Guidelines No. 24. Since material terms related to hedged items and hedging instruments are substantially identical, and such hedging transactions are deemed highly effective, the assessment of effectiveness is based on the similarity of the terms. The effectiveness of hedging transactions is also assessed by the correlation between factors that cause fluctuations in interest rates of hedged items and those of hedging instruments.

 

  (b)

Hedge accounting for foreign currency risks

Domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries have adopted the deferred hedge accounting method for hedging foreign currency risks arising from financial assets and liabilities denominated in foreign currencies, except for certain transactions qualifying for the allocation method applicable to forward exchange contracts and other contracts. Portfolio hedging is applied to determine hedged items as described in JICPA Industry Committee Practical Guidelines No. 25 “Treatment of Accounting and Auditing concerning Accounting for Foreign Currency Transactions in the Banking Industry” (October 8, 2020). Hedging instruments (e.g., currency swaps and forward exchange contracts) are designated to hedged items collectively by currencies.

Portfolio hedging or individual hedging is applied to hedge foreign currency risks arising from equity investments in foreign subsidiaries and foreign affiliates and from available-for-sale securities (other than bonds) denominated in foreign currencies. Monetary claims and liabilities denominated in the same foreign currencies or forward exchange contracts are used as hedging instruments. As for the hedge accounting method applied to equity investments in foreign subsidiaries and foreign affiliates, foreign currency translation differences arising from hedging instruments are recorded as foreign currency translation adjustments. The fair value hedge accounting method is applied to available-for-sale securities (other than bonds) denominated in foreign currencies.

 

12


  (c)

Hedge accounting for stock price fluctuation risks

Individual hedging is applied to hedge market fluctuation risks arising from strategic equity securities held by domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries. Instruments such as total return swaps are used as hedging instruments. The effectiveness of hedging transactions is assessed by the correlation between changes in the fair value of hedged items and changes in the fair value of hedging instruments. The fair value hedge accounting method is applied.

 

  (d)

Transactions among consolidated subsidiaries

Derivative transactions including interest rate swaps and currency swaps which are designated as hedging instruments among consolidated subsidiaries or between trading accounts and other accounts (or among internal sections) are not eliminated from the consolidated statements of income or valuation difference, but are recognized as related gains or losses or deferred under hedge accounting because these derivative transactions meet non-arbitrariness and certain other criteria under JICPA Industry Committee Practical Guidelines No. 24 and No. 25 and are regarded as equivalent to external third-party cover transactions.

 

  (19)

Cash and cash equivalents in the consolidated statements of cash flows

Cash and cash equivalents in the consolidated statements of cash flows are defined as “Cash and due from banks” on the consolidated balance sheet.

 

  (20)

Consumption taxes

National and local consumption taxes are primarily excluded from transaction amounts of MUFG and its domestic consolidated subsidiaries. Non-deductible portions of consumption taxes on the purchases of tangible fixed assets are expensed when incurred.

 

  (21)

Adoption of consolidated taxation system

MUFG and some of its domestic consolidated subsidiaries have adopted the consolidated taxation system.

 

  (22)

Application of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System

MUFG and some of its domestic consolidated subsidiaries do not apply Paragraph 44 of Accounting Standards Board of Japan (“ASBJ”) Guidance No. 28, “Amendments to Accounting Standard for Tax Effect Accounting” (February 16, 2018), to items revised under the stand-alone taxation system in connection with the transition from the consolidated taxation system to the group tax sharing system under the “Partial Amendments to Income Tax Act, etc.” (Act No. 8, March 31, 2020) due to the application of Paragraph 3 of ASBJ Practical Issues Task Force Report No. 39, “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (March 31, 2020), and instead apply the pre-amendment income tax provisions to the amount of deferred tax assets and deferred tax liabilities.

 

  (23)

Accounting of bills discounted and rediscounted

Bills discounted and rediscounted are accounted for as financial trading in accordance with JICPA Industry Committee Practical Guidelines No. 24.

 

  (24)

Accounting standards for foreign subsidiaries

If the financial statements of foreign subsidiaries are prepared in accordance with the International Financial Reporting Standards (“IFRS”) or the Generally Accepted Accounting Principles in the United States (“U.S. GAAP”), such financial statements are used in the consolidated accounting process.

If the financial statements of foreign subsidiaries are prepared in accordance with generally accepted accounting principles in each domicile country and not in accordance with IFRS or U.S. GAAP, the financial statements of foreign subsidiaries are mainly rearranged in accordance with U.S. GAAP.

Adjustments are also made when necessary in the consolidated accounting process.

 

13


(Changes in Accounting Policies)

(Changes in Accounting Policies Due to Revisions to Accounting Standards, etc.)

(Accounting Standard for Revenue Recognition)

Accounting Standard Board of Japan (“ASBJ”) Statement No. 29, “Accounting Standard for Revenue Recognition” (ASBJ, March 30, 2018), and ASBJ Guidance No. 30, “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ, March 30, 2018), are applied from the beginning of the six months ended September 30, 2021. Under these accounting standards, revenue is recognized in an amount expected to be received in exchange for goods or services when control of promised goods or services is transferred to a customer. A primary change resulting from the application of these accounting standards relates to revenue from annual membership fees recorded as income from the credit card business. Such revenue was previously recognized when received from customers but is currently recognized over the period in which the services are provided.

In accordance with the transitional measures set forth in the proviso in paragraph 84 of the Accounting Standard for Revenue Recognition, the cumulative effect of retroactively applying the new accounting policy to reporting periods prior to the beginning of the six months ended September 30, 2021 was recognized as adjustments to retained earnings at the beginning of the six months ended September 30, 2021, and the new accounting policy is applied from the beginning of the six months ended September 30, 2021 as a change in MUFG’s accounting policies. However, due to application of the method set forth in paragraph 86 of the Accounting Standard for Revenue Recognition, the new accounting policy was not retroactively applied to a contract for which substantially all of the revenue had been recognized in accordance with the previous accounting treatment prior to the beginning of the six months ended September 30, 2021.

As a result, at the beginning of the six months ended September 30, 2021, retained earnings decreased by ¥6,617 million. The impact on each of fees and commissions income, ordinary profits, profits before income taxes and per share information for the six months ended September 30, 2021 is not significant.

In accordance with the transitional measures set forth in paragraph 89-3 of the Accounting Standard for Revenue Recognition, information on breakdowns of revenues from contracts with customers for the six months ended September 30, 2020 is not disclosed.

(Changes in Presentation of Financial Information)

From the beginning of the six months ended September 30, 2021, expenses related to credit cards, which were previously recorded as general and administrative expenses, are recorded as fees and commissions expenses.

This reflects the change made in the presentation of expenses corresponding to income related to credit cards, which is recorded as fees and commissions income, as a result of a review of fees and commissions income that was conducted in connection with the adoption of ASBJ Statement No.29, “Accounting Standard for Revenue Recognition” and ASBJ Guidance No.30, “Implementation Guidance on Accounting Standard for Revenue Recognition” from the beginning of the six months ended September 30, 2021, to disclose financial information in a manner that more closely reflects the actual economic situation.

In order to reflect this change in the presentation of the financial information, the consolidated financial statements for the six months ended September 30, 2020, have been retroactively restated.

As a result, fees and commissions expenses of ¥107,688 million and general and administrative expenses of ¥1,374,768 million previously presented in the consolidated statement of income for the six months ended September 30, 2020 have been restated, resulting in the current presentation of fees and commissions expenses of ¥142,852 million and general and administrative expenses of ¥1,339,604 million.

(Additional Information)

(Major overseas subsidiaries’ total credit costs which are expected to be reflected in MUFG’s consolidated financial statements as of and for the third quarter of the fiscal year ending March 31, 2022)

Major overseas subsidiaries which were consolidated based on their financial statements as of and for the quarter ended June 30, 2021 adopted ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” the new guidance that introduced the concept of current expected credit loss, as of the beginning of the first quarter of the fiscal year ended December 31, 2020. As a result, these subsidiaries record provision for allowance for credit losses by taking into account certain forecasted information such as macroeconomic indicators.

Under the new guidance, it is currently estimated that the subsidiaries will record gains of approximately ¥30 billion in total for the quarter ended September 30, 2021. The estimate includes gains on reversal of allowance for credit losses related to the loans held for sale subject to valuation in accordance with Accounting Standards Codification (ASC) 310 “Receivables” released by the FASB, as MUFG Americas Holdings Corporation (“MUAH”), a consolidated subsidiary of MUFG, has entered into a Share Purchase Agreement with U.S. Bancorp (“USB”) to sell all of the shares in MUFG Union Bank, N.A. (“MUB”) held by MUAH. Further details of the planned sale are described in “17. Subsequent Events” below. The subsidiaries’ total gains will be reflected in MUFG’ s consolidated financial statements as of and for the quarter ending December 31, 2021.

Total credit costs include credit costs for trust accounts, provision for general allowance for credit losses, losses on loan write-offs, provision for specific allowance for credit losses, other credit costs, reversal of allowance for credit losses, reversal of reserve for contingent losses included in credit costs and gains on loans written-off.

 

14


2.

Consolidated Balance Sheets

 

I.

Equity securities and other capital investments in affiliates

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Equity securities in affiliates

   ¥           2,734,165      ¥             3,040,518  

Other capital investments in affiliates

     29,239        28,901  

The amount of investments in jointly controlled companies included in the amounts in the above table was as follows:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Investments in jointly controlled companies

   ¥                36,320      ¥                    4,958  

 

II.

Securities loaned under unsecured securities lending transactions included in “Securities”

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Securities loaned under unsecured securities lending transactions

   ¥                49,430      ¥                  20,094  

Securities borrowed under securities borrowing transactions and securities purchased under resale agreements where the borrowers or purchasers have the right to dispose of the securities through sale or re-pledging without any restrictions

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Securities re-pledged

   ¥         17,327,289      ¥           15,803,318  

Securities re-loaned

     1,518,005        1,472,884  

Securities held without disposition

     5,751,240        4,892,986  

Bank acceptance bills discounted, commercial bills discounted, documentary bills discounted and foreign currency bills bought discounted with the right to dispose of the bills discounted through sale or re-pledging without any restrictions

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Bills discounted (face value)

   ¥           1,156,955      ¥             1,019,824  

Foreign currency bills bought which were re-discounted upon transfer

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Foreign currency bills re-discounted (face value)

   ¥                  5,238      ¥                    5,875  

 

 

15


III.

Loans to bankrupt borrowers and Non-accrual delinquent loans included in “Loans and bills discounted”

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Loans to bankrupt borrowers

   ¥                47,013      ¥                  47,396  

Non-accrual delinquent loans

     847,073        827,443  

Loans to bankrupt borrowers are loans, after write-offs, to bankrupt borrowers as defined in Articles 96-1-3-1 to 5 and 96-1-4 of the Enforcement Ordinance of the Corporate Tax Law (No. 97 in 1965) on which accrued interest income is not recognized (“Non-accrual loans”) as there is substantial doubt as to the collection of principal and/or interest because of delinquencies in payments of principal and/or interest for a significant period of time or for some other reasons.

Non-accrual delinquent loans represent non-accrual loans other than loans to bankrupt borrowers and loans renegotiated at concessionary terms, including reduction or deferral of interest payments, to assist borrowers in improving their financial condition.

 

IV.

Accruing loans contractually past due 3 months or more

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Accruing loans contractually past due 3 months or more

   ¥                26,090      ¥                  16,298  

Accruing loans contractually past due 3 months or more represent loans whose principal and/or interest payments have been past due for 3 months or more, other than loans to bankrupt borrowers and non-accrual delinquent loans.

 

V.

Restructured loans

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Restructured loans

   ¥              420,857      ¥                413,725  

Restructured loans represent loans renegotiated at concessionary terms, including interest rate reductions, deferral of interest payments, deferral of principal repayments, waivers of loan claims, and other negotiated terms, that are favorable to the borrower, for the purpose of assisting borrowers in improving their financial condition, other than loans to bankrupt borrowers, non-accrual delinquent loans and accruing loans contractually past due 3 months or more.

 

VI.

Total of loans to bankrupt borrowers, non-accrual delinquent loans, accruing loans contractually past due 3 months or more and restructured loans

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Total of loans to bankrupt borrowers, non-accrual delinquent loans, accruing loans contractually past due 3 months or more and restructured loans

   ¥           1,341,034      ¥             1,304,864  

The amounts provided in Notes III to VI above represent gross amounts before the deduction of allowance for credit losses.

 

16


VII.

Assets pledged as collateral

Assets pledged as collateral and their relevant liabilities as of March 31, 2021 and September 30, 2021 were as follows:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Assets pledged as collateral:

     

Cash and due from banks

   ¥ 3,940      ¥ 3,888  

Trading assets

     337,572        278,161  

Securities

     16,740,970        15,925,064  

Loans and bills discounted

     12,107,017        12,095,873  

Other assets

     5,203        5,349  

Tangible fixed assets

     5,221        5,074  
  

 

 

    

 

 

 

Total

   ¥         29,199,925      ¥           28,313,412  
  

 

 

    

 

 

 

Relevant liabilities to above assets:

     

Deposits

   ¥ 472,244      ¥ 552,917  

Trading liabilities

     19,360        16,819  

Borrowed money

     28,698,014        27,703,524  

Bonds payable

     59,620        43,480  

Other liabilities

     7,445        9,738  

In addition to the above, the following assets were pledged as collateral for cash settlements and other transactions or as deposits for margin accounts for futures and other transactions:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Monetary claims bought

   ¥                27,441      ¥                  27,761  

Trading assets

     1,757,709        1,997,968  

Securities

     13,659,016        14,019,772  

Loans and bills discounted

     5,373,937        5,226,797  

Furthermore, the following assets were sold under repurchase agreements or loaned under securities lending transactions with cash collateral as of March 31, 2021 and September 30, 2021:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Trading assets

   ¥ 2,328,320      ¥ 2,464,159  

Securities

     6,223,880        8,655,192  
  

 

 

    

 

 

 

Total

   ¥ 8,552,201      ¥ 11,119,352  
  

 

 

    

 

 

 
     

Relevant liabilities to above assets:

     

Payables under repurchase agreements

   ¥           8,035,898      ¥           10,557,998  

Payables under securities lending transactions

     162,559        82,906  

In addition, the following assets were pledged under general collateral repurchase agreements using the subsequent collateral allocation method as of March 31, 2021 and September 30, 2021:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Trading assets

   ¥ 3,612,051      ¥ 3,692,200  

Securities

     948,493        —    
  

 

 

    

 

 

 

Total

   ¥           4,560,544      ¥             3,692,200  
  

 

 

    

 

 

 

 

17


VIII.

Non-recourse debt of consolidated special purpose companies was as follows.

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Non-recourse debt

     

Borrowed money

   ¥                  2,100      ¥                    2,100  

Bonds payable

     3,714        6,386  

Relevant assets to above non-recourse debt:

     

Cash and due from banks

   ¥ 474      ¥ 641  

Investment securities

     —          4,739  

Loans and bills discounted

     20,000        20,000  

Other assets

     154        200  

Tangible fixed assets

     5,221        5,074  

The above table includes certain assets reported in the immediately preceding Item VII.

 

IX.

Overdraft facilities and commitment lines of credit are binding contracts under which MUFG’s consolidated subsidiaries have obligations to disburse funds up to predetermined limits upon the borrower’s request as long as there has been no breach of contracts. The total amount of the unused portion of these facilities as of March 31, 2021 and September 30, 2021 was as follows:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Unused overdraft facilities and commitment lines of credit

   ¥         91,174,733      ¥           89,659,294  

The total amount of the unused portion does not necessarily represent actual future cash requirements because many of these contracts are expected to expire without being drawn upon. In addition, most of these contracts include clauses that allow MUFG’s consolidated subsidiaries to decline a borrower’s request for disbursement or decrease contracted limits for cause, such as changes in financial market condition or deterioration in a borrower’s creditworthiness. MUFG’s consolidated subsidiaries may request a borrower to pledge real property and/or securities as collateral upon signing of a contract and will perform periodic monitoring on a borrower’s business condition in accordance with internal procedures, which may lead to renegotiation of the terms and conditions of the contracts and/or initiation of a request for additional collateral and/or guarantees.

 

X.

The amount of assets that belonged to the declaration of trust for which a domestic trust banking subsidiary was the settlor and the trustee was as follows:

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Loans and bills discounted

   ¥              490,744      ¥                457,350  

 

18


XI.

In accordance with the “Law concerning Revaluation of Land” (the “Land Revaluation Law”) (No. 34, March 31, 1998), land used for business operations of domestic consolidated banking subsidiaries and domestic consolidated trust banking subsidiaries has been revalued as of the dates indicated below. The total excess from revaluation, net of income taxes corresponding to the excess that were recognized as “Deferred tax liabilities for land revaluation,” is stated as “Land revaluation excess” in net assets. Land revaluation excess includes MUFG’s share of affiliated companies’ Land revaluation excess.

Dates of revaluation:

Domestic consolidated banking subsidiaries: March 31, 1998.

Domestic consolidated trust banking subsidiaries: March 31, 1998, December 31, 2001 and March 31, 2002.

The method of revaluation as set forth in Article 3, Paragraph 3 of the Land Revaluation Law:

Fair values are determined based on (1) “published land price under the Land Price Publication Law” stipulated in Article 2-1 of the “Enforcement Ordinance of the Law concerning Revaluation of Land” (“Ordinance”) (No. 119, March 31, 1998), (2) “standard land price determined on measurement spots under the Enforcement Ordinance of the National Land Planning Law” stipulated in Article 2-2 of the “Ordinance,” (3) “land price determined by the method established and published by the Director General of the National Tax Agency in order to calculate land value that is used for determining taxable amounts subject to landholding tax articulated in Article 16 of the Landholding Tax Law” stipulated in Article 2-4 of the “Ordinance” with price adjustments by shape and time and (4) appraisal by certified real estate appraisers stipulated in Article 2-5 of the “Ordinance” with price adjustments for time.

In addition, some of MUFG’s affiliates that were accounted for under the equity method conducted a revaluation for land used for business operations on March 31, 2002.

 

XII.

Accumulated depreciation on tangible fixed assets

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Accumulated depreciation on tangible fixed assets

   ¥           1,156,029      ¥             1,128,603  

 

XIII.

Subordinated borrowings with special contractual provisions which rank below other debts with regard to the fulfillment of obligations included in “Borrowed money”

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Subordinated borrowings

   ¥              259,500      ¥                259,500  

 

XIV.

Subordinated bonds included in “Bonds payable”

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Subordinated bonds

   ¥           4,291,810      ¥             4,040,366  

 

XV.

The principal amount of money trusts entrusted to domestic trust banking subsidiaries, for which repayment of the principal to the customers was guaranteed

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Principal-guaranteed money trusts

   ¥           7,827,463      ¥             7,044,826  

 

XVI.

Guarantee obligations for private placement bonds (provided in accordance with the Article 2-3 of the Financial Instruments and Exchange Law) among the bonds and other securities included in “Securities”

 

     (in millions of yen)  
     March 31, 2021      September 30, 2021  

Guarantee obligations for private placement bonds

   ¥              268,057      ¥                245,837  

 

19


XVII.

Contingent liabilities

(Litigation)

In the ordinary course of business, MUFG is subject to various litigation and regulatory matters. In accordance with applicable accounting guidance, MUFG establishes a Reserve for Contingent Losses arising from litigation and regulatory matters when they are determined to be probable in their occurrences and the probable loss amount can be reasonably estimated. Based upon current knowledge and consultation with counsel, management believes the eventual outcome of such litigation and regulatory matters, where losses are probable and the probable loss amounts can be reasonably estimated, would not have a material adverse effect on MUFG’s financial position, results of operations or cash flows.

Management also believes the amount of loss that is reasonably possible, but not probable, from various litigation and regulatory matters is not material to MUFG’s financial position, results of operations or cash flows.

 

20


3. Consolidated Statements of Income

 

I.

“Other ordinary income” for the periods indicated included the following:

 

     (in millions of yen)  
     For the six months ended September 30,  
     2020      2021  

Equity in earnings of the equity method investees

   ¥ 153,190      ¥ 218,377  

Gains on sales of equity securities

     67,191        145,337  

Gains on loans written-off

     30,894        41,760  

 

II.

“General and administrative expenses” for the periods indicated included the following:

 

     (in millions of yen)  
     For the six months ended September 30,  
     2020      2021  

Personnel expenses

   ¥ 631,199      ¥ 624,102  

Depreciation and amortization

     166,795        169,579  

 

III.

“Other ordinary expenses” for the periods indicated included the following:

 

     (in millions of yen)  
     For the six months ended September 30,  
     2020      2021  

Write-offs of loans

   ¥ 87,852      ¥   68,856  

Outsourcing expenses of consolidated subsidiaries’ operating information services

     13,614        14,899  

Provision for allowance for credit losses

     201,989        —    

 

21


4.

Consolidated Statements of Changes in Net Assets

For the six months ended September 30, 2020

 

I.

Information on the class and number of issued shares and treasury stock

 

     (Thousand shares)  
     Number of
shares as of
April 1, 2020
     Number of
shares
increased
     Number of
shares
decreased
     Number of
shares as of
September 30, 2020
     Note  

Issued shares:

              

Common stock

     13,581,995        —          —          13,581,995     
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     13,581,995        —          —          13,581,995     
  

 

 

    

 

 

    

 

 

    

 

 

    

Treasury stock:

              

Common stock

     741,363        11        4,035        737,339        (Notes 1 and 2)  
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     741,363        11        4,035        737,339     
  

 

 

    

 

 

    

 

 

    

 

 

    

(Notes)

 

1.

The increase in the number of shares of common stock held in treasury by 11 thousand shares was due to the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit. The decrease in the number of shares of common stock held in treasury by 4,035 thousand shares was due to the sale of shares for a performance-based director and officer stock compensation plan using a Board Incentive Plan trust (“BIP trust”), the sale of shares in response to requests made by shareholders holding shares constituting less than one whole unit and a decrease in the number of shares held by equity method affiliates.

2.

The number of shares of common stock as of April 1, 2020 and September 30, 2020 includes 31,064 thousand shares and 27,031 thousand shares held by the BIP trust, respectively. For the six months ended September 30, 2020, the number of shares held by the BIP trust decreased by 4,033 thousand shares.

 

II.

Information on share subscription rights

None.

 

III.

Information on cash dividends

 

(1)

Cash dividends paid during the six-month period ended September 30, 2020

 

Date of approval

  

Type of stock

   Total
dividends
(in millions
of yen)
   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Annual General Meeting of
Shareholders on June 29, 2020

   Common stock    160,918    12.5    March 31, 2020    June 30, 2020

 

(Note)

The total dividend amount includes ¥388 million of dividends on the treasury shares held by the BIP trust.

 

(2)

Dividends the record date for which fell within the six-month period and the effective date of which was after the six-month period ended September 30, 2020

 

Date of approval

   Type of stock    Total
dividends
(in millions
of yen)
   Source of
dividends
   Dividend
per share
(in yen)
   Dividend
record date
   Effective date

Meeting of Board of Directors
on November 13, 2020

   Common stock    160,918    Retained earnings    12.5    September 30, 2020    December 7, 2020

 

(Note)

The total dividend amount includes ¥337 million of dividends on the treasury shares held by the BIP trust.

 

22


For the six months ended September 30, 2021

 

I.

Information on the class and number of issued shares and treasury stock

 

     (Thousand shares)  
     Number of
shares as of
April 1, 2021
     Number of
shares
increased
     Number of
shares
decreased
     Number of
shares as of
September 30, 2021
     Note  

Issued shares:

              

Common stock

     13,581,995        —          —          13,581,995     
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     13,581,995        —          —          13,581,995     
  

 

 

    

 

 

    

 

 

    

 

 

    

Treasury stock:

              

Common stock

     737,192        13,409        8,717        741,884        (Notes 1 and 2)  
  

 

 

    

 

 

    

 

 

    

 

 

    

Total

     737,192        13,409        8,717        741,884     
  

 

 

    

 

 

    

 

 

    

 

 

    

(Notes)

 

1.

The increase in the number of shares of common stock held in treasury by 13,409 thousand shares was due to the acquisition of shares for the BIP trust, the repurchases of shares in response to requests made by shareholders holding shares constituting less than one whole unit and an increase in the number of shares held by equity method affiliates. The decrease in the number of shares of common stock held in treasury by 8,717 thousand shares was due to the sale of shares for the BIP trust, the sale of shares in response to requests made by shareholders holding shares constituting less than one whole unit and a decrease in the number of shares held by equity method affiliates.

2.

The number of shares of common stock as of April 1, 2021 and September 30, 2021 includes 27,002 thousand shares and 31,668 thousand shares held by the BIP trust, respectively. For the six months ended September 30, 2021, the number of shares held by the BIP trust increased by 13,381 thousand shares and decreased by 8,715 thousand shares.

 

II.

Information on share subscription rights

None.

 

III.

Information on cash dividends

 

(1)

Cash dividends paid during the six-month period ended September 30, 2021

 

Date of approval

  

Type of stock

   Total
dividends
(in millions
of yen)
   Dividend
per share
(in yen)
   Dividend
record date
   Effective
date

Annual General Meeting of
Shareholders on June 29, 2021

   Common stock    160,918    12.5    March 31, 2021    June 30, 2021

 

(Note)

The total dividend amount includes ¥337 million of dividends on the treasury shares held by the BIP trust.

 

(2)

Dividends the record date for which fell within the six-month period and the effective date of which was after the six-month period ended September 30, 2021

 

Date of approval

  

Type of stock

   Total
dividends
(in millions
of yen)
  

Source of

dividends

   Dividend
per share
(in yen)
   Dividend
record date
   Effective
date

Meeting of Board of Directors
on November 15, 2021

   Common stock    173,791    Retained earnings    13.5    September 30, 2021    December 6, 2021

 

(Note)

The total dividend amount includes ¥427 million of dividends on the treasury shares held by the BIP trust.

 

23


5.

Consolidated Statements of Cash Flows

 

I.

“Cash and cash equivalents” compared to items presented on the consolidated balance sheet

The amount of “Cash and cash equivalents” is equal to the amount of “Cash and due from banks” on the consolidated balance sheet.

 

24


6.

Leases

Operating leases

 

I.

Lessee

Future lease payments, including interest expenses, under non-cancelable operating leases as of March 31, 2021 and September 30, 2021 were as follows:

 

     (in millions of yen)  
         March 31, 2021              September 30, 2021      

Due within one year

   ¥ 47,170      ¥ 42,506  

Due after one year

     126,671        118,919  
  

 

 

    

 

 

 

Total

   ¥ 173,841      ¥ 161,425  
  

 

 

    

 

 

 

(Note) The above table does not include lease payments that are booked as “Right-of-use asset” at overseas subsidiaries.

 

II.

Lessor

Future lease receivables, including interest receivables, under non-cancelable operating leases as of March 31, 2021 and September 30, 2021 were as follows:

 

     (in millions of yen)  
         March 31, 2021              September 30, 2021      

Due within one year

   ¥ 6,936      ¥ 4,912  

Due after one year

     25,972        30,455  
  

 

 

    

 

 

 

Total

   ¥ 32,908      ¥ 35,367  
  

 

 

    

 

 

 

 

25


7.

Financial Instruments

 

I.

Matters concerning fair value of financial instruments and breakdown by input level

The amounts on the consolidated balance sheet, the fair value of financial instruments, the difference between them as well as a breakdown of financial instruments by input level are as follows.

The following tables do not include investment trusts and stocks with no market price, etc. for which transitional measures are applied in accordance with Paragraph 26 of ASBJ Guidance No. 31, “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ, July 4, 2019, “Guidance for Application of Fair Value Measurement”), and investments in partnerships and others for which transitional measures are applied in accordance with Paragraph 27 of the Guidance for Application of Fair Value Measurement. (See Note (*2) to each of the tables in (1) and (Note 3) below.)

The fair values of financial instruments are classified into the following three levels depending on the observability and significance of the input used in the fair value calculation.

Level 1: Fair value determined based on (unadjusted) quoted prices in active markets for identical assets or liabilities

Level 2: Fair value determined based on directly or indirectly observable inputs other than the Level 1 inputs

Level 3: Fair value determined based on significant unobservable inputs

Where multiple inputs are used with a significant impact on the fair value calculation, the fair value of a financial instrument is classified based on the lowest of the priority levels to which any of those inputs belongs.

 

26


(1)

Financial assets and liabilities at fair value on the consolidated balance sheets

As of March 31, 2021

 

     (in millions of yen)  

Category

   Amount on
consolidated
balance sheet
 
   Level 1     Level 2     Level 3     Total  

Monetary claims bought (*1)

     —         1,245,990       279,561       1,525,551  

Trading assets (*2)

     7,350,626       4,381,559       60,127       11,792,313  

Money held in trust(Trading purpose / Other)

     —         1,189,564       3,015       1,192,580  

Securities (Available-for-sale securities)

     47,871,133       19,240,770       430,361       67,542,265  

Domestic equity securities

     5,188,975       27,410       —         5,216,386  

Government bonds

     32,073,409       271,300       —         32,344,709  

Municipal bonds

     —         3,731,515       —         3,731,515  

Short-term corporate bonds

     —         564,097       —         564,097  

Corporate bonds

     —         3,911,889       57       3,911,947  

Foreign equity securities

     85,064       903       56       86,025  

Foreign bonds

     10,518,815       10,601,532       116,351       21,236,699  

Other securities (*2)

     4,868       132,119       313,895       450,883  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     55,221,759       26,057,885       773,066       82,052,711  
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading liabilities (*2)

     5,447,473       82,488       —         5,529,962  

Borrowed money (FVO) (*3)

     —         276,788       —         276,788  

Bonds payable (FVO) (*3)

     —         194,560       24,844       219,405  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,447,473       553,837       24,844       6,026,155  
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*4) (*5) (*6)

     (19,470     381,463       86,167       448,160  

Interest rate-related derivatives

     (796     490,815       50,231       540,249  

Currency-related derivatives

     (48     (108,078     8,116       (100,011

Equity-related derivatives

     (20,770     18,698       12,960       10,889  

Bond-related derivatives

     2,145       (16,812     14,312       (355

Commodity-related derivatives

     —         (0 )       (62     (62

Credit-related derivatives

     —         (3,158     (62     (3,220

Other derivatives

     —         —         672       672  

 

(*1)

Monetary claims bought consist of securitized products, etc. of ¥1,525,551 million accounted for in the same manner as available-for-sale securities.

(*2)

The amount of investment trusts to which transitional measures are applied in accordance with Paragraph 26 of the Guidance for Application of Fair Value Measurement is not included in the table above. The amount of such investment trusts on the consolidated balance sheet is financial assets of ¥4,560,086 million and financial liabilities of ¥145,293 million.

(*3)

Some overseas subsidiaries apply the fair value option.

(*4)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities arising from derivative transactions are presented on a net basis, and net liabilities in the aggregate are presented in minus.

(*5)

Derivative transactions to which hedge accounting is applied are reported on the consolidated balance sheet at ¥(321,373) million.

(*6)

Transactions to which hedge accounting is applied include interest rate swap transactions and interest rate futures transactions designated as hedging instruments for the purpose of fixing cash flows from hedged loans and other assets. Deferred hedge accounting is applied to these transactions. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, September 29, 2020) applies are accounted for under the standard.

 

27


As of September 30, 2021

 

     (in millions of yen)  

Category

   Amount on
consolidated
balance sheet
 
   Level 1     Level 2     Level 3     Total  

Monetary claims bought (*1)

     —         1,393,547       190,800       1,584,347  

Trading assets (*2)

     7,652,681       4,473,019       55,009       12,180,710  

Money held in trust(Trading purpose / Other)

     —         1,209,696       8,891       1,218,588  

Securities (Available-for-sale securities)

     49,419,902       22,652,134       420,270       72,492,306  

Domestic equity securities

     5,334,108       33,487       —         5,367,595  

Government bonds

     32,188,384       1,095,734       —         33,284,118  

Municipal bonds

     —         4,016,071       —         4,016,071  

Short-term corporate bonds

     —         872,120       —         872,120  

Corporate bonds

     —         3,859,731       2,586       3,862,317  

Foreign equity securities

     107,148       908       60       108,117  

Foreign bonds

     11,777,413       12,628,962       99,280       24,505,656  

Other securities (*2)

     12,847       145,118       318,342       476,309  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     57,072,583       29,728,397       674,971       87,475,953  
  

 

 

   

 

 

   

 

 

   

 

 

 

Trading liabilities (*2)

     5,124,360       110,605       —         5,234,966  

Borrowed money (FVO) (*3)

     —         225,254       —         225,254  

Bonds payable (FVO) (*3)

     —         278,571       30,451       309,022  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     5,124,360       614,431       30,451       5,769,243  
  

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*4) (*5) (*6)

     (9,569     571,023       73,795       635,249  

Interest rate-related derivatives

     1,780       389,387       28,677       419,846  

Currency-related derivatives

     1,155       210,448       2,944       214,548  

Equity-related derivatives

     (13,612     (10,481     13,776       (10,317

Bond-related derivatives

     1,106       (15,411     28,118       13,813  

Commodity-related derivatives

     —         —         (52     (52

Credit-related derivatives

     —         (2,919     13       (2,906

Other derivatives

     —         —         317       317  

 

(*1)

Monetary claims bought consist of securitized products, etc. of ¥1,584,347 million accounted for in the same manner as available-for-sale securities.

(*2)

The amount of investment trusts to which transitional measures are applied in accordance with Paragraph 26 of the Guidance for Application of Fair Value Measurement is not included in the table above. The amount of such investment trusts on the consolidated balance sheet is financial assets of ¥4,380,632 million and financial liabilities of ¥30,450 million.

(*3)

Some overseas subsidiaries apply the fair value option.

(*4)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities arising from derivative transactions are presented on a net basis, and net liabilities in the aggregate are presented in minus.

(*5)

Derivative transactions to which hedge accounting is applied are reported on the consolidated balance sheet at ¥(111,172) million.

(*6)

Transactions to which hedge accounting is applied include interest rate swap transactions and interest rate futures transactions designated as hedging instruments for the purpose of fixing cash flows from hedged loans and other assets. Deferred hedge accounting is applied to these transactions. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, September 29, 2020) applies are accounted for under the standard.

 

28


(2)

Financial assets and liabilities which are not stated at fair value on the consolidated balance sheets

Cash and due from banks, Call loans and bills bought, Receivables under resale agreements, Receivables under securities borrowing transactions, Foreign exchanges, Call money and bills sold, Payables under repurchase agreements, Payables under securities lending transactions, Commercial papers, Due to trust accounts and Other liabilities are not included in the following tables since they are predominantly short-term (within one year), and their fair values approximate their carrying amounts.

As of March 31, 2021

 

     (in millions of yen)  
  

 

 

 

Category

   Fair value      Amount on
consolidated
balance sheet
     Difference
   Level 1      Level 2      Level 3      Total  

Monetary claims bought (*1)

     —          —          4,444,134        4,444,134        4,457,324        (13,189

Money held in trust (other / held to maturity)

     —          90,303        —          90,303        90,598        (295

Securities (held to maturity)

     1,123,480        779,560        —          1,903,040        1,857,104        45,935  

Government bonds

     1,123,480        —          —          1,123,480        1,100,447        23,032  

Municipal bonds

     —          —          —          —          —          —    

Short-term corporate bonds

     —          —          —          —          —          —    

Corporate bonds

     —          —          —          —          —          —    

Foreign bonds

     —          779,560        —          779,560        756,657        22,902  

Other securities

     —          —          —          —          —          —    

Loans and bills discounted (*2) (*3)

     —          264,506        107,108,922        107,373,428        106,233,590        1,139,838  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     1,123,480        1,134,370        111,553,057        113,810,907        112,638,618        1,172,289  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Deposits

     —          211,551,672        —          211,551,672        211,521,257        30,415  

Negotiable certificates of deposit

     —          8,101,001        —          8,101,001        8,099,119        1,882  

Borrowed money

     —          30,775,278        —          30,775,278        30,833,677        (58,399

Bonds payable (*3)

     —          13,073,206        —          13,073,206        12,689,100        384,106  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —          263,501,159        —          263,501,159        263,143,154        358,004  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Monetary claims bought include securitized products, etc. of ¥2,044,691 million accounted for in the same manner as securities held to maturity.

(*2)

General and specific allowances for credit losses of ¥949,478 million corresponding to loans are deducted. However, with respect to items other than loans, the amount stated on the consolidated balance sheet is shown since the amount of allowance for credit losses corresponding to these items is insignificant.

(*3)

With respect to interest rate swaps to which special hedge accounting treatment is applied to offset fluctuations in the market value of the hedged items and forward exchange contracts, etc. to which the allocation method is applied, the fair value of such interest rate swaps and such currency swaps is included in the fair value of the hedged items. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, September 29, 2020) applies are accounted for under the standard.

 

29


As of September 30, 2021

 

     (in millions of yen)  
  

 

 

 

Category

   Fair value      Amount on
consolidated
balance sheet
     Difference
   Level 1      Level 2      Level 3      Total  

Monetary claims bought (*1)

     —          —          4,551,312        4,551,312        4,539,363        11,949  

Money held in trust (other / held to maturity)

     —          82,523        —          82,523        82,588        (65

Securities (held to maturity)

     1,119,500        866,750        —          1,986,250        1,958,373        27,876  

Government bonds

     1,119,500        —          —          1,119,500        1,100,383        19,116  

Municipal bonds

     —          —          —          —          —          —    

Short-term corporate bonds

     —          —          —          —          —          —    

Corporate bonds

     —          —          —          —          —          —    

Foreign bonds

     —          866,750        —          866,750        857,990        8,760  

Other securities

     —          —          —          —          —          —    

Loans and bills discounted (*2) (*3)

     —          266,627        104,216,485        104,483,112        103,416,514        1,066,597  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

     1,119,500        1,215,900        108,767,797        111,103,198        109,996,840        1,106,358  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Deposits

     —          212,296,425        —          212,296,425        212,274,571        21,854  

Negotiable certificates of deposit

     —          8,946,741        —          8,946,741        8,945,312        1,429  

Borrowed money

     —          29,844,044        —          29,844,044        29,895,789        (51,744

Bonds payable (*3)

     —          13,012,103        —          13,012,103        12,611,851        400,252  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     —          264,099,314        —          264,099,314        263,727,523        371,791  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Monetary claims bought include securitized products, etc. of ¥2,171,222 million accounted for in the same manner as securities held to maturity.

(*2)

General and specific allowances for credit losses of ¥850,202 million corresponding to loans are deducted. However, with respect to items other than loans, the amount stated on the consolidated balance sheet is shown since the amount of allowance for credit losses corresponding to these items is insignificant.

(*3)

With respect to interest rate swaps to which special hedge accounting treatment is applied to offset fluctuations in the market value of the hedged items and forward exchange contracts, etc. to which the allocation method is applied, the fair value of such interest rate swaps and such currency swaps is included in the fair value of the hedged items. Of these hedge relationships, all hedge relationships to which “Practical Solution on the Treatment of Hedge Accounting for Financial Instruments that Reference LIBOR” (ASBJ PITF No.40, September 29, 2020) applies are accounted for under the standard.

 

30


(Note 1)

Description of the valuation techniques and inputs used to measure fair value

Monetary claims bought

The fair value of monetary claims bought is determined using prices obtained from third-party vendors (broker-dealers, etc.) or the prices estimated based on internal models.

With respect to some securitized products backed by general corporate loans, the fair value is measured by considering the estimated fair value amounts determined using projected cash flows through an analysis of the underlying loans, probability of default, prepayment rates, etc. and discounting the projected cash flows using discount rates reflecting the liquidity premium based on historical market data and the prices obtained from independent broker-dealers. These products are classified into Level 3.

For other securitized products, the fair value is determined based on the prices obtained from independent third parties after considering the results of periodic confirmation of the current status of these products, including price comparison with similar products, time series data comparison of the same product, and analysis of consistency with publicly available market indices. These products are classified into Level 2 or Level 3 depending on the inputs used for the prices obtained from independent third parties.

For certain monetary claims bought for which these methods do not apply, the fair value is measured based on either the present value using projected future cash flows through an analysis of prepayment rates, etc., and discounting the project cash flows at the market interest rates as of the valuation date with certain adjustments, or is the carrying amount if their fair value approximates such carrying amount from their qualitative viewpoint. If these monetary claims bought are measured at present value, these monetary claims bought are classified into Level 2 or, if they are short-term and their fair value approximates the carrying amount, then the carrying amount is presented as their fair value, and they are classified into Level 3.

Trading assets

Securities such as bonds that are held for trading purposes are classified as Level 1 if prices quoted by stock exchanges are available in an active market, and as Level 2 if the fair value is determined based on either the present value of the expected future cash flows discounted at an interest rate based on the market interest rates as of the date of evaluation with certain adjustments or prices quoted by the financial institutions from which these securities are purchased.

Money held in trust

For securities that are part of trust property in an independently managed monetary trust with the primary purpose to manage securities, the fair value is determined based on the prices quoted by the financial institutions from which these securities are purchased, and these securities are classified into Level 2 depending on the fair value hierarchy of the component assets.

See “Money Held in Trust” for notes on money held in trust by category based on each purpose of holding the money held in trust.

Securities

The fair value of equity securities is determined based on the prices quoted by stock exchanges and equity securities are primarily classified into Level 1 as the quoted prices are available in active markets. The fair value of bonds is determined based on the market price or the price quoted by the financial institutions from which they are purchased or based on the price reasonably calculated using internal models. Government bonds are primarily classified into Level 1, other bonds are primarily classified into Level 2, and preferred securities included in Other securities are primarily classified into Level 3.

For privately placed guaranteed bonds held by MUFG’s bank subsidiaries, the fair value is determined based on the present value of expected future cash flows, which are adjusted to reflect credit risk, the amounts expected to be collected from collateral and guarantees and guarantee fees, and discounted at an interest rate based on the market interest rates as of the date of evaluation with certain adjustments. These bonds are classified into Level 2 depending on credit risk, etc.

The fair value of floating rate Japanese government bonds is determined based on the present value as calculated by discounting the expected future cash flows, which are estimated based on factors such as the yield of government bonds and discounted at a rate based on such yield of government bonds adjusted for the value of embedded options and the liquidity premium based on the actual market premiums observed in the past. These Japanese government bonds are classified into Level 2.

The fair value of investment trusts is determined based on the publicly available price and these investment trusts are not classified into any fair value hierarchy as a result of applying the transitional measures in accordance with Paragraph 26 of the Guidance for Application of Fair Value Measurement.

See “Securities” for notes on securities by category based on each purpose of holding the securities.

 

31


Loans and bills discounted

With respect to loans, for each category of loans based on their types, credit ratings and maturity periods, the fair value is determined based on the present value of expected future cash flows, which are adjusted to reflect default risk and the amount expected to be collected from collateral and guarantees and discounted at an interest rate based on the market interest rates as of the date of evaluation with certain adjustments. These loans are classified into Level 3. For loans with floating interest rates such as certain residential loans provided to individual home owners, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount, unless the creditworthiness of the borrower has changed significantly since the loan origination. These loans are classified as Level 3.

For receivables from bankrupt, virtually bankrupt and likely to become bankrupt borrowers, credit loss is estimated based on factors such as the present value of expected future cash flows or the amount expected to be collected from collateral and guarantees. Since the fair value of these items approximates the net amount of receivables after the deduction of allowance for credit losses on the consolidated balance sheet as of the consolidated balance sheet date, such amount is presented as the fair value. These receivables are classified into Level 3. The fair value of loans qualifying for special hedge accounting treatment of interest rate swaps or the allocation method applicable to forward exchange contracts and other contracts under Generally Accepted Accounting Principles in Japan (“JGAAP”) reflects the fair value of such interest rate swaps or forward exchange contracts and other contracts.

Deposits and Negotiable certificates of deposit

For demand deposits, the amount payable on demand as of the consolidated balance sheet date (i.e., the carrying amount) is considered to be the fair value. For floating rate time deposits, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount because the market interest rates are reflected in such deposits within a short time period. The fair value of most fixed rate time deposits is the present value of expected future cash flows grouped by certain maturity periods discounted at the market interest rates. These are classified into Level 2.

Borrowed money

For floating rate borrowings, the carrying amount is presented as the fair value, as the fair value approximates such carrying amount. This is on the basis that the interest rates on such floating rate borrowings reflect the market interest rates in a short time period and that there has been no significant change in the creditworthiness of MUFG or MUFG’s consolidated subsidiaries after such borrowings were made. For fixed rate borrowings, the fair value is calculated as the present value of expected future cash flows from these borrowings grouped by certain maturity periods, which are discounted at the market interest rates reflecting the premium applicable to MUFG’s or MUFG’s consolidated subsidiaries. These are classified as Level 2. The fair value of borrowed money qualifying for special hedge accounting treatment of interest rate swaps under JGAAP reflects the fair value of such interest rate swaps.

Bonds payable

The fair value of corporate bonds issued by MUFG and MUFG’s consolidated subsidiaries is determined based on their market price. For certain corporate bonds, the fair value is calculated as the present value of expected future cash flows discounted at the market interest rates. For floating rate corporate bonds without market prices, the carrying amount of such bonds is presented as the fair value, as the fair value approximates such carrying amount. This is on the basis that the interest rates on such floating rate corporate bonds reflect the market interest rates in a short time period and that there has been no significant change in the creditworthiness of MUFG’s or MUFG’s consolidated subsidiaries after the issuance. For fixed rate corporate bonds without market prices, the fair value is the present value of expected future cash flows from these borrowings, which are discounted at the market interest rates reflecting the premium applicable to MUFG or MUFG’s consolidated subsidiaries. These are classified as Level 2. The fair value of corporate bonds qualifying for special hedge accounting treatment of interest rate swaps under JGAAP reflects the fair value of such interest rate swaps.

For structured bonds issued by some overseas subsidiaries, the fair value option is applied, and the fair value of structured bonds is calculated based on models. Structured bonds for which observable inputs are used are classified into Level 2. Structured bonds for which significant unobservable inputs are used are classified into Level 3.

 

32


Derivative transactions

Derivative transactions are ones involving interest rates (interest futures, interest options, interest swaps and other transactions), ones involving foreign currencies (currency futures, currency options, currency swaps and other transactions), and ones involving bonds (bond futures, bond future options and other transactions). The fair value of exchange-traded derivative transactions is based on the prices posted by exchanges. The fair value of over-the-counter derivative transactions is based on the discounted present value or amount calculated under the option-price calculation model.

The key inputs used in the valuation techniques for over-the-counter derivative transactions include interest rate yield curves, foreign currency exchange rates and volatility. For over-the-counter derivative transactions, adjustments are made for counterparty credit risk adjustments (credit valuation adjustments (CVA)) and adjustments are also made to reflect the impact of uncollateralized funding (funding valuation adjustments (FVA)). The calculation of CVA takes into account the probability of a default event occurring for each counterparty which is primarily derived from an observed or estimated spread on credit default swaps. In addition, the calculation of CVA takes into account the effect of credit risk mitigation such as pledged collateral and the legal right of offset with the counterparty. The calculation of FVA takes into account MUFG’s market funding spread reflecting the credit risk of MUFG and the funding exposure of any uncollateralized component of an over-the-counter derivative instrument entered into with the counterparty.

Exchange-traded derivative transactions valued using quoted prices are classified into Level 1. Over-the-counter derivative transactions are classified into Level 2 if their fair value is not measured based on significant unobservable inputs. Over-the-counter derivative transactions whose fair value is measured based on significant unobservable inputs are classified into Level 3.

 

33


(Note 2)

Quantitative information about financial assets and liabilities measured and presented on the consolidated balance sheets at fair value and classified in Level 3

 

(1)

Quantitative information on significant unobservable inputs

As of March 31, 2021

 

Category

  

Valuation technique

  

Signification unobservable inputs

  

Range

  

Weighted

average (*1)

Monetary claims bought

  

Securitized products

   Internal model (*2)    Correlation between underlying assets    3.0%    3.0%
   Liquidity premium    1.3%~1.5%    1.3%
   Prepayment rate    18.3%    18.3%
   Probability of default    0.0%~83.7%    —  
   Recovery rate    57.4%    57.4%

Securities

  

Foreign bonds

   Return on equity method    Probability of default    0.0%~8.0%    0.3%
   Recovery rate    35.0%~90.0%    76.7%
   Market-required return on capital    8.0%~10.0%    9.9%

Other

   Discounted cash flow    Liquidity premium    0.9%~3.2%    2.9%

Derivatives

  

Interest rate-related derivatives

   Option model    Correlation between interest rates    30.0%~61.9%    —  
   Correlation between interest rate and foreign exchange rate    15.1%~60.0%    —  
   Volatility    0.0%~100.0%    —  

Currency-related derivatives

   Option model    Correlation between interest rates    10.0%~70.0%    —  
   Correlation between interest rate and foreign exchange rate    0.0%~60.0%    —  
   Correlation between foreign exchange rates    50.0%~70.5%    —  
   Volatility    9.4%~22.1%    —  

Equity-related derivatives

   Option model    Volatility    21.5%~39.9%    —  
   Correlation between interest rate and equity    38.9%    —  
   Correlation between foreign exchange rate and equity    (58.3)%~54.9%    —  
   Correlation between equities    9.0%~95.0%    —  
   Discounted cash flow    Term of litigation    0.1~14.0months    —  

 

(*1)

The weighted average is calculated by weighing each input by the relative fair value of the respective financial assets.

(*2)

For further details of Internal model, refer to “Monetary claims bought” in “(Note 1) Description of the valuation techniques and inputs used to measure fair value” under “I. Matters concerning fair value of financial instruments and breakdown by input level” above.

 

34


As of September 30, 2021

 

Category

  

Valuation technique

  

Signification unobservable inputs

   Range      Weighted
average (*1)
 

Monetary claims bought

        

Securitized products

   Internal model (*2)    Correlation between underlying assets      3.0%        3.0%  
   Liquidity premium      0.6%~0.9%        0.9%  
   Prepayment rate      24.2%        24.2%  
   Probability of default      0.0%~85.8%        —    
   Recovery rate      60.0%        60.0%  

Securities

           

Foreign bonds

   Return on equity method    Probability of default      0.0%~4.1%        0.3%  
   Recovery rate      55.0%~90.0%        79.6%  
   Market-required return on capital      8.0%~10.0%        9.9%  

Other

   Discounted cash flow    Liquidity premium      1.1%~3.2%        2.9%  

Derivatives

           

Interest rate-related derivatives

   Option model    Correlation between interest rates      30.0%~65.4%        —    
   Correlation between interest rate and foreign exchange rate      16.5%~60.0%        —    
   Volatility      13.0%~100.0%        —    

Currency-related derivatives

   Option model    Correlation between interest rates      30.0%~70.0%        —    
   Correlation between interest rate and foreign exchange rate      0.0%~60.0%        —    
   Correlation between foreign exchange rates      50.0%~70.5%        —    
   Volatility      9.3%~22.5%        —    

Equity-related derivatives

   Option model    Volatility      22.9%~35.4%        —    
   Correlation between foreign exchange rate and equity      (58.3)%~54.9%        —    
   Correlation between equities      9.7%~95.0%        —    
   Discounted cash flow    Term of litigation      1.0~15.0months        —    

 

(*1)

The weighted average is calculated by weighing each input by the relative fair value of the respective financial assets.

(*2)

For further details of Internal model, refer to “Monetary claims bought” in “(Note 1) Description of the valuation techniques and inputs used to measure fair value” under “I. Matters concerning fair value of financial instruments and breakdown by input level” above.

 

35


(2)

Table showing reconciliation between the opening balance and the closing balance during the reporting period, and unrealized gains (losses) recognized in net income (losses)

For the fiscal year ended March 31, 2021

 

                                         (in millions of yen)  

Category

   March 31,
2020
    Included
in
earnings
(*1)
    Included
in other
comprehensive
income
(*2)
    Purchases,
Issues,
Sales,
Settlements
    Transfers
into
Level 3
(*3)
    Transfers
out of
Level 3
(*4)
    March 31,
2021
    Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
March 31,
2021 (*1)
 

Monetary claims bought

     389,185       1,771       3,469       (114,864     —         —         279,561       6,366  

Trading assets

     18,658       7,234       0       34,455       2       (222     60,127       6,578  

Monetary held in trust (Trading purpose / Other)

     1,129       (7     (23     1,917       —         —         3,015       (7

Securities (Available-for- sale securities)

     335,718       3,491       (5,757     105,954       70       (9,114     430,361       3,489  

Corporate bonds

     9,151       (2     (0     (46     70       (9,114     57       (3

Foreign equity securities

     212       0       5       (162     —         —         56       0  

Foreign bonds

     123,961       (3     (5,582     (2,024     —         —         116,351       (3

Other securities

     202,393       3,496       (180     108,186       —         —         313,895       3,496  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     744,690       12,489       (2,311     27,462       72       (9,337     773,066       16,427  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bonds payable (FVO)

     31,222       3,382       (606     (1,699     5,459       (12,914     24,844       (1,531
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     31,222       3,382       (606     (1,699     5,459       (12,914     24,844       (1,531
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*5)

     34,704       70,288       (177     4,523       (19,960     (3,210     86,167       68,426  

Interest rate-related derivatives

     13,495       54,853       (65     15,590       (31,188     (2,454     50,231       57,158  

Currency-related derivatives

     5,887       4,175       (88     (312     (1,479     (66     8,116       3,870  

Equity-related derivatives

     10,106       12,029       (24     (21,168     12,707       (690     12,960       7,291  

Bond-related derivatives

     3,196       833       —         10,282       —         —         14,312       781  

Commodity-related derivatives

     (65     1       1       (0     —         —         (62     1  

Credit-related derivatives

     1,379       (1,630     (0     188       —         —         (62     (707

Other derivatives

     704       25       —         (57     —         —         672       31  

 

(*1)

Mainly included in Trading income and Other operating income in the consolidated statements of income.

(*2)

Included in Net unrealized gains (losses) on available-for-sale securities and Foreign currency translation adjustments in Other comprehensive income in the consolidated statements of comprehensive income.

(*3)

Transfers into Level 3 from Level 2 resulted from the lack of observable market data due to a decrease in market activity for derivatives. These transfers were made at the beginning of the fiscal year.

(*4)

Transfers into Level 2 from Level 3 for corporate bonds were due principally to changes in the impact of unobservable creditworthiness inputs of private placement bonds guaranteed by MUFG Bank. Transfers into Level 2 from Level 3 for bonds payable (FVO) were due principally to changes in the impact of significant unobservable inputs. These transfers were made at the beginning of the fiscal year.

(*5)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities and gains or losses arising from derivative transactions are presented on a net basis, and net liabilities and losses in the aggregate are presented in minus.

 

36


For the six months ended September 30, 2021

 

                                         (in millions of yen)  

Category

   March 31,
2021
    Included
in
earnings
(*1)
    Included
in other
comprehensive
income
(*2)
    Purchases,
Issues,
Sales,
Settlements
    Transfers
into
Level 3
(*3)
    Transfers
out of
Level 3
(*3)
    September 30,
2021
    Change in
unrealized
gains (losses)
included in
earnings for
assets and
liabilities
still held at
September 30,
2021 (*1)
 

Monetary claims bought

     279,561       1,447       2,357       (92,566     —         —         190,800       2,541  

Trading assets

     60,127       665       —         (6,230     659       (212     55,009       284  

Monetary held in trust (Trading purpose / Other)

     3,015       32       (188     6,032       —         —         8,891       32  

Securities (Available-for- sale securities)

     430,361       3,042       8,466       (24,453     2,854       —         420,270       3,041  

Corporate bonds

     57       1       (270     (57     2,854       —         2,586       —    

Foreign equity securities

     56       0       3       —         —         —         60       0  

Foreign bonds

     116,351       6       7,343       (24,420     —         —         99,280       6  

Other securities

     313,895       3,034       1,389       23       —         —         318,342       3,034  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     773,066       5,188       10,635       (117,219     3,513       (212     674,971       5,900  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Bonds payable (FVO)

     24,844       478       2,285       3,728       7,117       (8,002     30,451       185  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     24,844       478       2,285       3,728       7,117       (8,002     30,451       185  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivatives (*4)

     86,167       (21,049     1,112       13,136       453       (6,023     73,795       (17,999

Interest rate-related derivatives

     50,231       (31,623     652       7,962       924       530       28,677       (31,071

Currency-related derivatives

     8,116       212       119       822       (470     (5,857     2,944       278  

Equity-related derivatives

     12,960       9,307       345       (8,138     —         (697     13,776       11,726  

Bond-related derivatives

     14,312       1,055       —         12,750       —         —         28,118       1,063  

Commodity-related derivatives

     (62     16       (5     (0     —         —         (52     16  

Credit-related derivatives

     (62     (19     —         94       —         —         13       (19

Other derivatives

     672       0       —         (355     —         —         317       6  

 

(*1)

Mainly included in Trading income and Other operating income in the consolidated statements of income.

(*2)

Included in Net unrealized gains (losses) on available-for-sale securities and Foreign currency translation adjustments in Other comprehensive income in the consolidated statements of comprehensive income.

(*3)

Transfers into Level 3 from Level 2 or into Level 2 from Level 3 resulted from the lack (availability) of observable inputs for valuation of derivatives embedded in bonds payable (FVO) or an increase (decrease) in the impact of significant unobservable inputs. These transfers were made at the beginning of the fiscal year.

(*4)

Derivative transactions in trading assets and liabilities as well as other assets and liabilities are shown together. Assets or liabilities and gains or losses arising from derivative transactions are presented on a net basis, and net liabilities and losses in the aggregate are presented in minus.

 

37


(3)

Description of the fair value valuation process

At MUFG, the middle division establishes policies and procedures for the calculation of fair value and procedures for the use of fair value valuation models, and the front division develops fair value valuation models in accordance with such policies and procedures. The middle division verifies such models, the inputs used and the fair values obtained through calculation to ensure compatibility with the policies and procedures. In addition, based on the results of such verification, the middle division determines appropriate fair value input level classifications. In the event that market prices obtained from third parties are used as fair values, they are verified through appropriate methods such as confirming the valuation techniques and inputs used and comparing them with the fair values of similar financial instruments.

 

(4)

Description of the sensitivity of the fair value to changes in significant unobservable inputs

Probability of default

Probability of default is an estimate of the likelihood that the default event will occur and MUFG will be unable to collect the contractual amounts. A significant increase (decrease) in the default rate would result in a significant decrease (increase) in a fair value.

Recovery rate and prepayment rate

Recovery rate is the proportion of the total outstanding balance of a bond or loan that is expected to be collected in a liquidation scenario. Prepayment rate represents the proportion of principal that is expected to be paid prematurely in each period on a security or pool of securities. Recovery rate and prepayment rate would affect estimation of future cash flows to a certain extent and changes in these inputs could result in a significant increase or decrease in fair value.

Market-required return on capital

Market-required return on capital is the return on capital expected by the secondary market. A significant increase (decrease) in the market-required return on capital would result in a significant decrease (increase) in the fair value of a financial asset.

Liquidity premium

Liquidity premium is an adjustment to discount rates to reflect uncertainty of cash flows and liquidity of the financial instruments.

When recent prices of similar instruments are unobservable in inactive or less active markets, discount rates are adjusted based on the facts and circumstances of the markets including the availability of quotes and the time since the latest available quotes. A significant increase (decrease) in discount rates would result in a significant decrease (increase) in a fair value.

Volatility

Volatility is a measure of the speed and severity of market price changes and is a key factor in pricing. A significant increase (decrease) in volatility would cause a significant increase (decrease) in the value of an option resulting in a significant increase (decrease) in fair value. The level of volatility generally depends on the tenor of the underlying assets and the strike price or level defined in the contract. Volatilities for certain combinations of tenor and strike price are not observable.

 

38


Correlation

Correlation is a measure of the relationship between the movements of two variables (i.e., how the change in one variable influences a change in the other variables). A variety of correlation-related assumptions are required for a wide range of instruments including foreign government and official institution bonds, asset-backed securities, corporate bonds, derivatives and certain other financial instruments. In most cases, correlations used are not observable in the market and must be estimated using historical information. Changes in correlation inputs can have a major impact, favorable or unfavorable, on the value of an instrument, depending on its nature. In addition, the wide range of correlation inputs are primarily due to the complex and unique nature of these instruments. There are many different types of correlation inputs, including cross-asset correlation (such as correlation between interest rate and equity) and same-asset correlation (such as correlation between interest rates). Correlation levels are highly dependent on market conditions and could have a relatively wide range of levels within or across asset classes. For interest rate contracts and foreign exchange contracts, the diversity in the portfolio held by MUFG is reflected in wide ranges of correlation, as the fair values of transactions with a variety of currencies and tenors are determined using several foreign exchange and interest rate curves. For equity derivative contracts, the wide range of correlation between interest rate and equity is primarily due to the large number of correlation pairs with different maturities of contracts.

Term of litigation

Term of litigation is the estimated period until the resolution of a certain litigation matter that relates to an issuer’s restricted shares (“Covered Litigation”) that MUFG purchased, which is referenced in certain swap transactions. These swaps are valued using a discounted cash flow methodology and are dependent upon the final resolution of the Covered Litigation.

The settlement timing of the Covered Litigation is not observable in the market, therefore the estimated term is classified as a level 3 input. The restricted shares which MUFG purchased will be convertible to listed shares of the issuer at the end of the Covered Litigation. The restricted shares will be diluted depending upon the settlement amount of the Covered Litigation and the dilution of the restricted shares is accomplished through an adjustment to the conversion rate of the restricted shares. In order to hedge the reduction of the conversion rate, MUFG entered into certain swaps with the seller which references the conversion rate. The value generated by these trades is subject to the ultimate term of the issuer’s litigation, subject to a minimum term referenced within the trade contracts.

 

(Note 3)

The following table sets forth the amounts of equity securities with no market price and investments in partnerships and others on the consolidated balance sheets. These securities and investments are not included in “Trading assets” or “Securities” in the tables presented under the section captioned “Matters concerning fair value of financial instruments and breakdown by input level”.

 

     (in millions of yen)  
     Amount on consolidated balance sheet  
     March 31, 2021      September 30, 2021  

Equity securities with no quoted market price available (*1) (*3)

   ¥ 270,297      ¥ 279,250  

Investments in partnerships and others (*2) (*3)

     190,649        240,023  

 

  (*1)

Equity securities with no market price include unlisted equity securities, etc. and are not subject to fair value disclosure in accordance with Paragraph 5 of ASBJ Guidance No. 19 “Implementation Guidance on Disclosures about Fair Value of Financial Instruments.”

  (*2)

Investments in partnerships and others mainly include silent partnerships and investment partnerships and other partnerships. Their fair values are not subject to fair value disclose in accordance with Paragraph 27 of the Guidance for Application of Fair Value Measurement.

  (*3)

An impairment loss of ¥7,098 million and ¥3,642 million was recorded on unlisted equity securities and other investments for the fiscal years ended March 31, 2021 and for the six months ended September 30, 2021, respectively.

 

39


8.

Securities

In addition to “Securities” on the consolidated balance sheet, the figures in the following tables include negotiable certificates of deposit in “Cash and due from banks,” securitized products in “Monetary claims bought” and others.

 

I.

Debt securities being held to maturity

 

     (in millions of yen)  
     March 31, 2021  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair value exceeds amount on consolidated balance sheet:

        

Domestic bonds

   ¥ 1,100,447      ¥ 1,123,480      ¥ 23,032  

Government bonds

     1,100,447        1,123,480        23,032  

Municipal bonds

     —          —          —    

Short-term corporate bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     1,027,737        1,055,170        27,432  

Foreign bonds

     615,901        641,612        25,711  

Other

     411,836        413,557        1,721  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 2,128,184      ¥ 2,178,650      ¥ 50,465  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed amount on consolidated balance sheet:

        

Domestic bonds

   ¥ —        ¥ —        ¥ —    

Government bonds

     —          —          —    

Municipal bonds

     —          —          —    

Short-term corporate bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     1,775,579        1,760,494        (15,085

Foreign bonds

     140,756        137,948        (2,808

Other

     1,634,823        1,622,546        (12,277
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 1,775,579      ¥ 1,760,494      ¥ (15,085
  

 

 

    

 

 

    

 

 

 

Total

   ¥   3,903,764      ¥   3,939,144      ¥      35,380  
  

 

 

    

 

 

    

 

 

 

 

40


     (in millions of yen)  
     September 30, 2021  
     Amount on
consolidated
balance sheet
     Fair value      Difference  

Securities whose fair value exceeds amount on consolidated balance sheet:

        

Domestic bonds

   ¥ 1,100,383      ¥ 1,119,500      ¥ 19,116  

Government bonds

     1,100,383        1,119,500        19,116  

Municipal bonds

     —          —          —    

Short-term corporate bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     2,412,416        2,446,574        34,157  

Foreign bonds

     508,440        526,879        18,439  

Other

     1,903,976        1,919,694        15,718  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 3,512,800      ¥ 3,566,074      ¥ 53,273  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed amount on consolidated balance sheet:

        

Domestic bonds

   ¥ —        ¥ —        ¥ —    

Government bonds

     —          —          —    

Municipal bonds

     —          —          —    

Short-term corporate bonds

     —          —          —    

Corporate bonds

     —          —          —    

Other securities

     616,795        605,585        (11,210

Foreign bonds

     349,549        339,870        (9,679

Other

     267,246        265,714        (1,531
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 616,795      ¥ 605,585      ¥ (11,210
  

 

 

    

 

 

    

 

 

 

Total

   ¥   4,129,596      ¥   4,171,659      ¥      42,063  
  

 

 

    

 

 

    

 

 

 

 

41


II.

Available-for-sale securities

 

     (in millions of yen)  
     March 31, 2021  
     Amount on
consolidated
balance sheet
     Acquisition
cost
     Difference  

Securities whose fair value exceeds the acquisition cost:

        

Domestic equity securities

   ¥ 5,046,662      ¥ 1,656,411      ¥ 3,390,250  

Domestic bonds

     26,326,866        26,158,978        167,887  

Government bonds

     20,753,038        20,629,641        123,397  

Municipal bonds

     2,568,637        2,553,512        15,124  

Short-term corporate bonds

     448,081        448,050        31  

Corporate bonds

     2,557,108        2,527,774        29,334  

Other securities

     13,498,203        12,828,440        669,762  

Foreign equity securities

     68,554        47,450        21,104  

Foreign bonds

     9,546,542        9,168,543        377,998  

Other

     3,883,106        3,612,447        270,659  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 44,871,732      ¥ 40,643,830      ¥ 4,227,901  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed the acquisition cost:

        

Domestic equity securities

   ¥ 169,723      ¥ 209,436      ¥ (39,712

Domestic bonds

     14,225,404        14,270,785        (45,381

Government bonds

     11,591,671        11,628,123        (36,452

Municipal bonds

     1,162,878        1,165,692        (2,814

Short-term corporate bonds

     116,015        116,020        (4

Corporate bonds

     1,354,838        1,360,947        (6,109

Other securities

     14,625,146        15,018,034        (392,888

Foreign equity securities

     17,470        17,472        (1

Foreign bonds

     11,690,157        11,965,154        (274,996

Other

     2,917,518        3,035,407        (117,889
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 29,020,274      ¥ 29,498,256      ¥ (477,981
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 73,892,007      ¥ 70,142,087      ¥ 3,749,919  
  

 

 

    

 

 

    

 

 

 

 

(Note)

The total difference amount shown in the table above includes ¥161,847 million revaluation gains on securities by application of the fair value hedge accounting method.

 

42


     (in millions of yen)  
     September 30, 2021  
     Amount on
consolidated
balance sheet
     Acquisition
cost
     Difference  

Securities whose fair value exceeds the acquisition cost:

        

Domestic equity securities

   ¥ 5,209,350      ¥ 1,622,070      ¥ 3,587,279  

Domestic bonds

     14,977,652        14,838,569        139,082  

Government bonds

     8,823,804        8,728,757        95,047  

Municipal bonds

     2,872,631        2,857,418        15,213  

Short-term corporate bonds

     448,067        448,021        45  

Corporate bonds

     2,833,148        2,804,372        28,775  

Other securities

     12,257,933        11,688,032        569,900  

Foreign equity securities

     68,545        25,910        42,634  

Foreign bonds

     8,614,091        8,304,187        309,904  

Other

     3,575,296        3,357,934        217,361  
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 32,444,935      ¥ 28,148,672      ¥ 4,296,263  
  

 

 

    

 

 

    

 

 

 

Securities whose fair value does not exceed the acquisition cost:

        

Domestic equity securities

   ¥ 158,245      ¥ 199,998      ¥ (41,752

Domestic bonds

     27,056,975        27,078,041        (21,066

Government bonds

     24,460,313        24,476,827        (16,514

Municipal bonds

     1,143,439        1,145,045        (1,605

Short-term corporate bonds

     424,052        424,074        (21

Corporate bonds

     1,029,169        1,032,093        (2,923

Other securities

     18,901,012        19,256,938        (355,925

Foreign equity securities

     39,572        41,055        (1,483

Foreign bonds

     15,891,564        16,146,274        (254,709

Other

     2,969,875        3,069,608        (99,732
  

 

 

    

 

 

    

 

 

 

Subtotal

   ¥ 46,116,233      ¥ 46,534,978      ¥ (418,744
  

 

 

    

 

 

    

 

 

 

Total

   ¥ 78,561,169      ¥ 74,683,651      ¥ 3,877,518  
  

 

 

    

 

 

    

 

 

 

 

(Note)

The total difference amount shown in the table above includes ¥190,598 million revaluation gains on securities by application of the fair value hedge accounting method.

 

43


III.

Securities with impairment losses

Securities other than those held for trading purposes and investments in affiliates (excluding certain equity securities with no quoted market price available and investments in partnerships and others) are subject to write-downs when their fair value significantly declines and it is determined as of the end of the reporting period that it is not probable that the value will recover to the acquisition cost. In such case, the fair value is recorded on the consolidated balance sheet and the difference between the fair value and the acquisition cost is recognized as losses for the reporting period (referred to as “impairment losses”).

Impairment losses on such securities for the fiscal year ended March 31, 2021 were ¥1,184 million consisting of ¥1,033 million on equity securities and ¥150 million on bonds and other securities.

Impairment losses on such securities for the six months ended September 30, 2021 were ¥1,618 million consisting of ¥1,581 million on equity securities and ¥37 million on bonds and other securities.

Whether there is any “significant decline in the fair value” is determined for each category of issuers in accordance with the internal standards for self-assessment of asset quality as provided below:

Bankrupt issuers, virtually bankrupt issuers and likely to become bankrupt issuers:

The fair value is lower than the acquisition cost.

Issuers requiring close watch:

The fair value has declined 30% or more from the acquisition cost.

Normal issuers:

The fair value has declined 50% or more from the acquisition cost.

“Bankrupt issuers” means issuers who have entered into bankruptcy, special liquidation proceedings or similar legal proceedings or whose notes have been dishonored and suspended from processing through clearing houses. “Virtually bankrupt issuers” means issuers who are not legally or formally bankrupt but are regarded as substantially in similar condition. “Likely to become bankrupt issuers” means issuers who are not yet legally or formally bankrupt but deemed to have a high possibility of becoming bankrupt. “Issuers requiring close watch” means issuers who are financially weak and are under close monitoring by our subsidiaries.

“Normal issuers” means issuers other than those who are categorized in the four categories of issuers mentioned above.

 

44


9.

Money Held in Trust

 

I.

Money held in trust being held to maturity

 

     (in millions of yen)  
     March 31, 2021  
     (a) Amount on
consolidated
balance sheet
     (b) Fair value      Difference
(b) - (a)
    Money held in
trust with
respect to
which (b)
exceeds (a)
     Money held
in trust with
respect to
which (b)
does not
exceed (a)
 

Money held in trust being held to maturity

   ¥      42,098      ¥      42,519      ¥        420      ¥     420      ¥ —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2021  
     (a) Amount on
consolidated
balance sheet
     (b) Fair value      Difference
(b) - (a)
    Money held in
trust with
respect to
which (b)
exceeds (a)
     Money held
in trust with
respect to
which (b)
does not
exceed (a)
 

Money held in trust being held to maturity

   ¥ 42,088      ¥ 42,497      ¥ 408     ¥ 408      ¥ —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(Note)

“Money held in trust with respect to which (b) exceeds (a)” and “Money held in trust with respect to which (b) does not exceed (a)” show the breakdown of “Difference (b) - (a)”.

 

II.

Money held in trust not for trading purposes or being held to maturity

 

     (in millions of yen)  
     March 31, 2021  
     (a) Amount on
consolidated
balance sheet
     (b)
Acquisition
cost
     Difference
(a) - (b)
    Money held in
trust with
respect to
which (a)
exceeds (b)
     Money held
in trust with
respect to
which (a)
does not
exceed (b)
 

Money held in trust not for trading purposes or being held to maturity

   ¥ 1,193,461      ¥ 1,212,966      ¥ (19,504   ¥ 244      ¥ 19,749  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     (in millions of yen)  
     September 30, 2021  
     (a) Amount on
consolidated
balance sheet
     (b)
Acquisition
cost
     Difference
(a) - (b)
    Money held in
trust with
respect to
which (a)
exceeds (b)
     Money held
in trust with
respect to
which (a)
does not
exceed (b)
 

Money held in trust not for trading purposes or being held to maturity

   ¥ 1,210,864      ¥ 1,236,539      ¥ (25,675   ¥ 191      ¥ 25,866  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(Note)

“Money held in trust with respect to which (a) exceeds (b)” and “Money held in trust with respect to which (a) does not exceed (b)” show the breakdown of “Difference (a) - (b)”.

 

45


10.

Net Unrealized Gains (Losses) on Available-for-Sale Securities

Net unrealized gains (losses) on available-for-sale securities recorded on the consolidated balance sheet as of the dates indicated consisted of the following :

As of March 31, 2021

 

     (in millions of yen)  

Net unrealized gains (losses)

   ¥ 3,561,035  

Available-for-sale securities

     3,587,271  

Money held in trust not for trading purpose or being held to maturity

     (19,504

Reclassification from “Available-for-sale securities” to “Debt securities being held to maturity”

     (6,731

Deferred tax liabilities

     (1,020,528

Net unrealized gains (losses) on available-for-sale securities, net of deferred tax liabilities
(before adjustments for non-controlling interests)

     2,540,506  

Non-controlling interests

     (9,246

MUFG’s ownership share in equity method investees’ unrealized gains (losses) on available-for-sale securities

     52,158  
  

 

 

 

Total

   ¥ 2,583,417  
  

 

 

 

(Notes)

 

1.

“Net unrealized gains (losses)” shown in the above table excludes ¥161,847 million of revaluation gains on securities as a result of application of the fair value hedge accounting method, which are recorded in current earnings.

2.

“Net unrealized gains (losses)” shown in the above table includes ¥213 million of unrealized losses on available-for-sale securities in investment limited partnerships and ¥587 million of unrealized losses as a result of foreign exchange adjustments related to available-for-sale securities denominated in foreign currencies that are included in equity securities with no quoted market price available.

As of September 30, 2021

 

     (in millions of yen)  

Net unrealized gains (losses)

   ¥ 3,665,682  

Available-for-sale securities

     3,696,571  

Money held in trust not for trading purpose or being held to maturity

     (25,675

Reclassification from “Available-for-sale securities” to “Debt securities being held to maturity”

     (5,212

Deferred tax liabilities

     (1,057,401

Net unrealized gains (losses) on available-for-sale securities, net of deferred tax liabilities
(before adjustments for non-controlling interests)

     2,608,281  

Non-controlling interests

     (9,391

MUFG’s ownership share in equity method investees’ unrealized gains (losses) on available-for-sale securities

     31,359  
  

 

 

 

Total

   ¥ 2,630,249  
  

 

 

 

(Notes)

 

1.

“Net unrealized gains (losses)” shown in the above table excludes ¥190,598 million of revaluation gains on securities as a result of application of the fair value hedge accounting method, which are recorded in current earnings.

2.

“Net unrealized gains (losses)” shown in the above table includes ¥8,707 million of unrealized gains on available-for-sale securities in investment limited partnerships and ¥943 million of unrealized gains as a result of foreign exchange adjustments related to available-for-sale securities denominated in foreign currencies that are included in equity securities with no quoted market price available.

 

46


11.

Derivatives

Derivatives to which hedge accounting is not applied

With respect to derivatives to which hedge accounting is not applied, the contract amounts or notional principal amounts and the fair values and related valuation gains (losses) as of the end of the reporting period by transaction type were as follows. The contract and other amounts do not represent the market risk exposures associated with the relevant derivatives.

 

I.

Interest rate-related derivatives

 

                                                                                                        
     (in millions of yen)  
     March 31, 2021  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

                                  
Interest rate futures   Sold    ¥ 7,891,121      ¥ 2,215,379      ¥ (5,686   ¥ (5,686
  Bought      1,015,246       823,267        468       468  
Interest rate options   Sold      401,135       45,680        (131     53  
  Bought      1,318,622       616,439        3,516       1,540  

Over-the-counter (“OTC”) transactions:

         
Forward rate agreements   Sold      74,912,366       8,479,625        (189     (189
  Bought      75,361,207       8,497,790        (172     (172
Interest rate swaps  

Receivable fixed rate/

Payable floating rate

     461,422,309       363,901,050        5,956,934       5,956,934  
 

Receivable floating rate/

Payable fixed rate

     457,690,070       359,944,279        (5,417,036     (5,417,036
 

Receivable floating rate/

Payable floating rate

     105,484,197       85,477,780        25,558       25,558  
 

Receivable fixed rate/

Payable fixed rate

     1,130,871       1,063,450        14,413       14,413  
Interest rate swaptions   Sold      22,963,538       16,397,995        (232,484     (68,570
  Bought      20,163,202       13,361,454        184,143       106,431  
Other   Sold      3,898,056       3,316,715        (33,022     (198
  Bought      4,654,833       3,807,451        44,179       417  
    

 

 

   

 

 

    

 

 

   

 

 

 

Total

                                                    —         —        ¥ 540,490     ¥ 613,962  
    

 

 

   

 

 

    

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

47


                                                                                                        
     (in millions of yen)  
     September 30, 2021  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

        

Interest rate futures

  Sold    ¥ 7,560,328      ¥ 2,763,883      ¥ (1,144   ¥ (1,144
  Bought      3,951,892       3,615,037       (2,041     (2,041

Interest rate options

  Sold      975,714       —         (374     (223
  Bought      3,550,318       2,085,745       5,342       1,076  

OTC transactions:

        

Forward rate agreements

  Sold      64,240,778       2,817,258       392       392  
  Bought      64,591,890       2,853,684       (519     (519

Interest rate swaps

  Receivable fixed rate/
Payable floating rate
     451,802,141       354,177,400       5,007,160       5,007,160  
  Receivable floating rate/
Payable fixed rate
     451,884,375       350,697,807       (4,552,473     (4,552,473
  Receivable floating rate/
Payable floating rate
     101,767,338       83,757,605       23,477       23,477  
  Receivable fixed rate/
Payable fixed rate
     1,086,352       1,020,187       14,131       14,131  

Interest rate swaptions

  Sold      25,475,962       17,531,209       (155,747     (9,910
  Bought      21,305,190       14,582,230       84,938       22,404  

Other

  Sold      4,505,724       3,885,129       (36,352     (2,283
  Bought      4,912,548       3,914,670       42,980       (124
    

 

 

   

 

 

   

 

 

   

 

 

 

Total

       —         —       ¥ 429,768     ¥ 499,919  
    

 

 

   

 

 

   

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

48


II.

Currency-related derivatives

 

                                                                                                        
     (in millions of yen)  
     March 31, 2021  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one year  
Transactions listed on exchanges:                                                                                                                   

Currency futures

 

Sold

   ¥ 60,158      ¥ 453      ¥ 468     ¥ 468  
  Bought      261,813        51,087        (477     (477

Currency options

 

Sold

     —          —          —         —    
  Bought      2,222        —          5       (2

OTC transactions:

            

Currency swaps

       61,251,096          47,114,495        125,034       125,034  

Forward contracts on foreign exchange

       130,683,832        8,808,484            126,132           126,132  

Currency options

  Sold      8,699,540        2,588,071        (67,217     36,333  
 

Bought

     7,912,996        2,220,993        36,202       (54,602
    

 

 

    

 

 

    

 

 

   

 

 

 

Total

                                                    —          —        ¥ 220,148     ¥ 232,887  
    

 

 

    

 

 

    

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

                                                                                                        
     (in millions of yen)  
     September 30, 2021  
     Contract amount      Fair value     Valuation
gains (losses)
 
     Total      Over one year  
Transactions listed on exchanges:                                                                                                                   

Currency futures

 

Sold

   ¥ 93,359      ¥ 1,039      ¥ (731)     ¥ (731)  
  Bought      233,023        57,941        1,869       1,869  

OTC transactions:

            

Currency swaps

       59,741,982        46,804,923        190,817       190,817  

Forward contracts on foreign exchange

       135,052,620        9,116,213        136,434       136,434  

Currency options

  Sold      7,080,746        2,304,224        (41,984     43,945  
 

Bought

     6,075,456        1,970,722        20,471       (54,140
    

 

 

    

 

 

    

 

 

   

 

 

 

Total

                                                    —          —        ¥ 306,877     ¥ 318,194  
    

 

 

    

 

 

    

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

49


III.

Equity-related derivatives

 

                                                                                                                  
     (in millions of yen)  
     March 31, 2021  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

        

Stock index futures

  Sold    ¥ 702,055     ¥ 20,821     ¥ (11,956   ¥ (11,956
  Bought      371,326       7,189       19,290       19,290  

Stock index options

  Sold          1,393,497              455,432       (108,044     (14,654
  Bought      1,008,108       308,165       79,941       29,748  

OTC transactions:

        

OTC securities option transactions

  Sold      380,546       172,171       (46,295     (30,316
  Bought      612,185       476,107       66,743       62,479  

OTC securities index swap transactions

  Receivable index volatility/
Payable interest rate
     463,164       93,291       (1,688     (1,688
  Receivable interest rate/
Payable index volatility
     1,861,638       258,166           5,767           5,767  

Forward transactions in OTC securities indexes

  Sold      1,598       —         232       232  
  Bought      48,521       2,704       7,872       7,872  
    

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                    —         —       ¥ 11,862     ¥ 66,774  
    

 

 

   

 

 

   

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

50


                                                                                                                  
     (in millions of yen)  
     September 30, 2021  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

        

Stock index futures

 

Sold

   ¥ 816,167     ¥ 22,388     ¥ (35   ¥ (35
  Bought      457,325       7,189       13,616       13,616  

Stock index options

 

Sold

         1,280,664       502,247       (102,787     (9,401
  Bought      748,602       295,804       75,341       27,142  

OTC transactions:

          

OTC securities option transactions

 

Sold

     466,424       257,705       (52,654     (35,085
  Bought      675,273             622,295            60,308            56,728  

OTC securities index swap transactions

  Receivable index volatility/
Payable interest rate
     554,586       71,841       9,865       9,865  
  Receivable interest rate/
Payable index volatility
     1,325,453       239,474       (3,372     (3,372

Forward transactions in OTC securities indexes

 

Sold

     557       —         4       4  
  Bought      79,112       —         (1,681     (1,681
    

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                    —         —       ¥ (1,395   ¥ 57,780  
    

 

 

   

 

 

   

 

 

   

 

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

51


IV.

Bond-related derivatives

 

                                                                                                                  
     (in millions of yen)  
     March 31, 2021  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

        

Bond futures

  Sold    ¥ 553,416     ¥ —       ¥ 1,307     ¥ 1,307  
  Bought      457,020       —         (445     (445

Bond futures options

  Sold      560,349       —         (605     389  
  Bought      815,820       —         1,888       172  

OTC transactions:

          

Bond OTC options

  Sold      203,167       —         (490     (71
  Bought      203,167       —                   598                 126  

Bond forward contracts

  Sold         1,866,591       —         (8,816     (8,816
  Bought      1,077,086       —         4,044       4,044  

Bond OTC swaps

  Receivable fixed rate/
Payable variable rate
     26,800       26,800       4,295       4,295  
  Receivable variable rate/
Payable fixed rate
     —         —         —         —    
  Receivable variable rate/
Payable variable rate
     328,981       328,981       1,333       1,333  
  Receivable fixed rate/
Payable fixed rate
     29,300       29,300       7,704       7,704  

Total return swaps

  Sold      —         —         —         —    
  Bought      309,835       208,018       (11,169     (11,169
    

 

 

   

 

 

   

 

 

   

 

 

 

Total

                                                    —         —       ¥ (355   ¥ (1,130
    

 

 

   

 

 

   

 

 

   

 

 

 

(Note)

The transactions above are stated at fair value and the related valuation gains (losses) are reported in the consolidated statements of income.

 

52


                                                                                                                  
     (in millions of yen)  
     September 30, 2021  
     Contract amount     Fair value     Valuation
gains (losses)
 
     Total     Over one year  

Transactions listed on exchanges:

        

Bond futures

  Sold    ¥ 471,446     ¥ —       ¥ 1,189     ¥ 1,189  
  Bought      279,576       —         (268     (268

Bond futures options

  Sold      194,077       —         (522     (331
  Bought      226,513       —         707       111  

OTC transactions:

          

Bond OTC options

  Sold      238,033       —         (458     80  
  Bought      385,496       —         696       33  

Bond forward contracts

  Sold      2,022,330       —         (3,739     (3,739
  Bought      1,103,297       —         4,080       4,080