Will Mitsubishi UFJ (MTU) Stock Disappoint in Q3 Earnings?

itsubishi UFJ Financial Group, Inc. MTU is scheduled to report its third-quarter fiscal 2017 (ended Dec 31) results on Feb 3.

The Japanese banking giant – Mitsubishi UFJ – had reported profits attributable to owners of parent of ¥490.5 billion ($4.67 billion) for the six months (ended Sep 30) of the fiscal year ended Mar 31, 2017, down 18.2% year over year. Results were affected by a rise in credit costs and fall in net interest income. However, fall in general & administrative expenses acted as a tailwind.

Despite this dismal performance, Mitsubishi UFJ’s shares gained over 23% on the NYSE for the three months ended Dec 31, 2016.

Will Mitsubishi UFJ disappoint again in the upcoming release? Let's see what factors might have influenced the earnings report this time around.

Factors to Impact Q3 Results

Profitability of Mitsubishi UFJ is likely to be hit by the sluggish growth in the Japanese economy and continued negative interest rate environment that was adopted by the Bank of Japan in early 2016. While central banks of most of the countries aim to boost growth and inflation through negative interest rates policy, this takes a toll on the banks’ net interest income. The company is not untouched from this impact.

Notably, in the last quarter, Mitsubishi UFJ reaffirmed its target of ¥850 billion of consolidated net income for the fiscal year ending Mar 31, 2017, reflecting a decline of 11% year over year.

Quarterly results are also likely to be affected by the continued appreciation of Japanese Yen against other currencies. Appreciation of domestic currency is likely to have impacted Mitsubishi UFJ’s overseas loans and deposits balances in the to-be-reported quarter.

Further, bottom-line growth might be hurt by continued rise in expenses, driven by regulatory costs in overseas businesses.

However, on a positive note, quarterly results might get a lift from the fee income base. Also, overall revenues should benefit from the company’s prior acquisitions.

Currently, Mitsubishi UFJ currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Among other foreign banks, Deutsche Bank AG DB, HSBC Holdings plc HSBC, Barclays PLC BCS are scheduled to release results on Feb 2, Feb 21 and Feb 23, respectively.

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