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MUFG Bank, Ltd. announces Recording of the Losses Associated with the Sale of MUFG Union Bank to U.S. Bancorp on Financial Statements for the First Half of Fiscal Year Ending March 2023 (under J-GAAP)

TOKYO & NEW YORK--(BUSINESS WIRE)--On September 21, 2021, MUFG and MUFG Bank, a core banking subsidiary of MUFG, announced an agreement[1] to sell all shares of MUFG Union Bank, N.A.(“MUB”), MUFG’s subsidiary owned through MUFG Americas Holdings Corporation(“MUAH”), to U.S. Bancorp(“USB”). Due to fluctuations in the market value of assets classified as held for sale in connection with the planned sale of the shares in MUB, MUFG is expected to record the losses in the consolidated financial statements (under J-GAAP) for the first half of the fiscal year ending March 31, 2023.

1. Details

Upon the decision to sell MUB due to the conclusion of the share transfer agreement, MUAH recognizes quarterly gains or losses due to fluctuations in the market value of MUB's assets as a result of the application of the market value evaluation (lower of cost or market) to the business subject to sale related to the share transfer.

Due to the rise in U.S. interest rates, MUAH posted a loss of ¥271.2 billion for the first quarter of the fiscal year ending December 2022 (January to March 2022) mainly due to the fair value valuation of securities and loans to be sold. [2]

This valuation loss was reflected in the consolidated financial results of MUFG for the first quarter of the fiscal year ending March 31, 2023, which were announced today.

In addition, with the rise in interest rates since the end of March 2022, MUAH is expected to record an additional loss of approximately ¥360 billion in the second quarter of the fiscal year ending December 2022 (April to June 2022) mainly due to the fair value valuation of securities and loans to be sold. [3]

As a result, MUFG's consolidated financial results for the first half of the fiscal year ending March 2023 will reflect these losses totaling approximately ¥630 billion.

2. Impact on business performance

Among the total valuation loss of approximately ¥630 billion, approximately ¥440 billion related to tax effects of available-for-sale securities and held-to-maturity securities and loans and other assets are expected to be recorded as extraordinary gains upon the sale to USB.

And valuation losses that are not expected to be recorded as extraordinary gains have been hedged. [4] As a result, MUFG's profits attributable to owners of parent for the full fiscal year is expected to be reduced by approximately ¥200 billion. [5]

Although fluctuations in total credit costs and ordinary profits may occur, MUFG's earnings target for the fiscal year ending March 2023 for Profits attributable to owners of parent of ¥1,000 billion, which was announced on May 16, 2022, included the loss of approximately ¥200 billion mentioned above. Therefore, there is no change to the earnings target.

[1]

For details on the agreement for the sale, please refer to the following press release:

https://www.mufg.jp/dam/pressrelease/2021/pdf/news-20210921-001_en.pdf

[2]

¥227.0 billion of valuation losses recognized mainly related to securities held for sale is reflected in Other non-recurring gains (losses), and ¥44.2 billion of valuation losses recognized mainly related to loans held for sale is reflected in Total credit costs.

[3]

It is currently estimated that, approximately ¥170 billion of valuation losses recognized mainly related to securities held for sale will be reflected in Other non-recurring gains (losses), and approximately ¥190 billion of valuation losses recognized mainly related to loans held for sale will be reflected in Total credit costs.

[4]

Although a portion of risks cannot be hedged, the impact is expected be kept up to several tens of billion yen of losses.

[5]

Based on the assumed exchange rate of US$1 = ¥136.68; the figure may fluctuate in line with the exchange rates

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Cautionary Statement Regarding MUFG’s Forward-Looking Statements

This communication contains forward-looking statements. We use words such as expects, intends, and similar expressions to identify forward-looking statements. Actual results could differ materially from those projected or forecast in the forward-looking statements. MUFG assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Contacts

MUFG Bank, Ltd.

Toshinao Endou +81-3-3240-1111

Managing Director, Head of Documentation & Corporate Secretary Department

Corporate Administration Division

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