Mitsubishi UFJ Financial Group Inc MUFG (XNYS) : MUFG Also Reports Modest Uptick in Credit Costs in 3Q We Prefer SMFG

Morningstar Equity Analyst Report | Report as of 04 Feb 2019 02:09, UTC | Page 1 of 14
Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Morningstar Rating Last Price Fair Value Estimate Price/Fair Value Trailing Dividend Yield % Forward Dividend Yield % Market Cap (Bil) Industry Stewardship
QQQQ 5.25 USD 7.12 USD 0.74 3.57 3.57 68.07 Banks - Global Standard
01 Feb 2019 01 Feb 2019 18 Oct 2018 01 Feb 2019 01 Feb 2019 01 Feb 2019
22:39, UTC 09:05, UTC
Morningstar Pillars Analyst Quantitative Important Disclosure:

Economic Moat None None The conduct of Morningstar’s analysts is governed by Code of Ethics/Code of Conduct Policy, Personal Security Trading Policy (or an equivalent of),
Valuation QQQQ Undervalued and Investment Research Policy. For information regarding conflicts of interest, please visit http://global.morningstar.com/equitydisclosures
Uncertainty Medium High
Financial Health — Strong MUFG Also Reports Modest Uptick in Credit Costs in 3Q; We Prefer SMFG
Source: Morningstar Equity Research
Quantitative Valuation
MUFG Business Strategy and Outlook banking era.
y
JPN
Michael Makdad, Eq. Analyst, 18 October 2018
Undervalued Fairly Valued Overvalued Mitsubishi UFJ Financial Group, or MUFG, is Japan’s Analyst Note
largest bank, with a 9.4% share of domestic loans and Michael Makdad, Eq. Analyst, 04 February 2019
Current 5-Yr Avg Sector Country
Price/Quant Fair Value 0.88 0.94 0.87 0.86
11.6% of deposits as of March 2018. In Japan, the Mitsubishi UFJ Financial Group (MUFG) reported
Price/Earnings 7.6 15.6 12.7 15.4 environment for banks has been tough for years and we October-December results similar to those reported by
Forward P/E 7.7 — 10.5 14.1 expect it to remain so. The long-running deflationary Sumitomo Mitsui Financial Group (SMFG) last week.
Price/Cash Flow 19.5 6.1 9.5 9.7 environment in the country has led to persistently low Similar to SMFG achieving 24% of full-year net profit
Price/Free Cash Flow — 10.2 10.9 18.3
Trailing Dividend Yield% 3.57 2.81 3.64 1.84
demand for loans, with the loan/deposit ratio having guidance of JPY 700 billion after 32% and 35% in the
Source: Morningstar declined from 74% in 2000 to around 55% at present. The fiscal first and second quarters (cumulative progression
liabilities/net assets ratio for Japan’s approximately 1 of 91%), MUFG achieved 23% of its full-year net profit
Bulls Say million business corporations has declined from a highly guidance of JPY 950 billion after 33% and 35% in the
OMUFG's price/book ratio of around 0.6 times looks leveraged 4 times in the mid-1990s to a healthy 129% as same period (cumulative progression of 92%). MUFG’s
inexpensive for long-term investors relative to many of June 2018, but corporate borrowers prioritize cash flow annualized MUFG's ROE declined sequentially from 8.4%
other large global banks. for paying down existing debt, rather than taking out new in the previous quarter to 5.5% for October-December,
OMUFG has a strong presence in multiple banking loans for investment. This comes even as the average similar to SMFG’s decline from 9.3% to 6.2%.
markets in Southeast Asia that are underbanked and interest rate on new bank loans has declined by 100 basis
offer long-term secular growth. points over the past decade to below 0.7%. Like SMFG, MUFG saw a modest reappearance of credit
OMUFG's growing presence in the U.S. market could costs this quarter after net write-backs in previous
provide profit upside if the group manages to reduce Facing such a tough environment in its home market, quarters, at 18 basis points of loans on an annualized
its high expense ratio there while controlling credit MUFG has expanded its overseas business significantly basis, versus SMFG’s 24 basis points. We think these
costs. since 2010, with overseas loans comprising 40% of total credit costs are mainly attributable to overseas loans, as
loans as of March 2018, compared with 21% in March rising USD interest rates and factors such as lower oil
2011. Mitsubishi UFJ Americas Holdings, the holding prices affected some borrowers. In terms of details where
Bears Say
company for California-based Union Bank, contributed MUFG’s results differed from SMFG’s, MUFG reported a
OMUFG’s ROE is lower than that most large global
11% of total profit in the year ended March 2018, while stronger top line, likely reflecting its larger overseas
banks, reflecting both its exposure to the tough
Krungsri (the fifth-largest bank in Thailand, 77% owned exposure, with net interest income up 4.3% year on year
Japanese market and its conservative approach that
by MUFG) contributed 7% and equity-method earnings of and total net revenue up 3%, but unlike SMFG that reduced
sometimes prioritizes prudence over aggressive
affiliate Morgan Stanley contributed 17%. MUFG is also expenses 7%, MUFG’s expenses in yen terms increased
pursuit of returns.
in the process of making Indonesia’s Bank Danamon a slightly, up 1% year over year.
OMUFG pays a lower dividend yield than the other
consolidated subsidiary and owns roughly 20% stakes in
two Japanese megabanks.
banks in the Philippines and Vietnam. By segment, MUFG’s preprovision operating profit grew
OMUFG lacks a competitive advantage in the U.S. in Japanese corporate & investment banking (up 9%),
market, where its persistent issues with cost In our view, MUFG should be able to achieve returns global corporate & investment banking (up 12%), and at
efficiency seem difficult to solve. commensurate with the cost of equity in the growing its large overseas subsidiaries that include Union Bank in
markets of Southeast Asia where it has scale and can California and Krungsri in Thailand (up 11%). Asset
import some expertise from more developed markets, but management grew 1% and domestic retail and
it will struggle to earn good returns in North America small-business banking declined 20%.
where the market is competitive and its costs are high.
The key to MUFG’s overall profitability remains its We maintain our no-moat rating and fair value estimate
domestic franchise, which is mostly dependent upon the of JPY 797 and USD 7.12 for MUFG. Although there is 38%
macroeconomic environment (level of interest rates, and upside to our valuation from today’s close, we continue to
intensity of loan demand) but also MUFG’s ability to trim prefer SMFG slightly. There is 45% upside to our valuation
costs as it reconfigures operations for a more digitalized for SMFG, and it has a stronger outlook for dividend growth
?
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Morningstar Equity Analyst Report |Page 2 of 14

22:39, UTC 09:05, UTC
Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE Michael Makdad, Eq. Analyst, 18 October 2018
Sumitomo Mitsui Financial Group Inc 8316 JPY 5,502,846 0 0.00 7.27 Our model estimates MUFG’s fair value at USD 7.12 per
share. This is 10.8 times our estimated earnings for the
Mizuho Financial Group Inc 8411 JPY 4,384,452 0 0.00 7.60
fiscal year ending March 2019 and 0.66 times book value
Bank of America Corporation BAC USD 274,414 88,947 0.00 10.87
as of June 2018.
Citigroup Inc C USD 150,802 72,239 0.00 9.51
than MUFG, in our view. Our base-case scenario assumes that the net interest
margin rises from 0.90% in the year ended March 2018 to
0.97% in the current year ending March 2019 and 0.99%
Economic Moat
in the year ending March 2020 due to increasing
Michael Makdad, Eq. Analyst, 18 October 2018
contribution of MUFG’s overseas loans (we expect net
We do not believe MUFG has an economic moat. It has
interest margin to rise further to 1.08% by the year ending
some degree of market power owing to its position as the
March 2023 after consolidation of Bank Danamon in
largest bank in Japan, with a 9.4% share of loans and
Indonesia). We assume loans grow at a 0.5% cumulative
11.6% of deposits as of March 2018, roughly 30% larger
annual growth rate on an organic basis, that fees grow at
than its domestic rivals SMFG and Mizuho, but its status
1.5% on an organic basis, and that expenses grow 0.7%
as the country’s top bank also requires it to be especially
on an organic basis (growing overseas and shrinking
mindful of its obligations to the broader Japanese society,
slightly in Japan).
and we believe it needs to be especially prudent and wary
of aggressive pursuit of profits if other stakeholders could
Our forecasts lead to an average return on equity of 6.0%,
be negatively affected by its actions. MUFG has not been
compared with a historical average of 7.2% in the eight
able to earn return on equity equal to our assumed cost
years since the global financial crisis. We use a 8.55%
of equity of 8.55% in recent years and indeed has trailed
cost of equity to derive our fair value, which is the blended
the other two megabanks, although we think it faces
average of 60% times 8.0% for Japan, 25% times 9.0%
somewhat fewer challenges than Mizuho in the coming
for developed-market exposures, and 15% times 10.0%
five years.
for emerging-market exposures.
Outside of Japan, although MUFG is the largest foreign
bank in the U.S. excluding Canadian banks, it is still Risk & Uncertainty
outside of the top 10 and its Union Bank unit on the West Michael Makdad, Eq. Analyst, 18 October 2018
Coast suffers from persistently low efficiency. In Thailand Our uncertainty rating for MUFG is medium. Since the
and Indonesia, MUFG has managed to gain control of the global financial crisis, Japanese banks have reported
fifth- and sixth-largest banks respectively, something that lower earnings volatility than banks in other developed
has proven difficult for foreign acquirers (Singapore’s DBS economies and lower earnings volatility than
failed to acquire Bank Danamon before MUFG finally emerging-market banks. Nonperforming loan, or NPL,
succeeded), but both of these banks have lower average ratios have steadily declined for almost all Japanese
ROEs than the top banks in their countries, perhaps banks over the past decade as interest rates have fallen
reflecting their histories of frequent ownership changes. and following many years of relatively slow credit growth.
MUFG reported an NPL ratio of 1.11% as of June 2018,
In Japan, MUFG may have narrow moats in certain of its the lowest in its history.
businesses, such as its 40%-owned ACOM consumer
finance subsidiary and asset management/investor However, the extended period of very long lending rates
services, which we estimate earn ROEs of around 15% in Japan (the average rate on new loans extended by
and 20%, respectively, but we do not see any advantage so-called "city" banks such as Mitsubishi UFJ Bank has
for MUFG in the larger retail banking business, where been below 1% since 2010, and the average rate on the
regional banks in dominant in their home regions and stock of outstanding loans at "city" banks below 1% since
customers are price-sensitive. 2015) means that some domestic borrowers with marginal
cash flows that are currently able to pay loan interest could
face difficulties doing so if interest rates rose even a little
Fair Value & Profit Drivers
bit. Moreover, Japanese megabanks’ expansion of
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22:39, UTC 09:05, UTC
overseas lending in the current decade, which has made partner at several large accounting firms, heads the audit
them the largest cross-border lenders in the world, leaves committee. Yuko Kawamoto, a professor at Waseda
them exposed to credit losses in the event of a global Graduate School of Business and Finance, heads the risk
recession or other significant economic dislocation. committee. Nobuyuki Hirano, president and group CEO of
MUFG, is the only nonindependent director on any of these
Stewardship committees, with the exception of the audit committee,
Michael Makdad, Eq. Analyst, 18 October 2018 which has three outside directors and two nonexecutive
We assign MUFG a stewardship rating of Standard. directors. The other nonindependent directors are MUFG
Chairman Kiyoshi Sono, MUFG Bank CEO Kanetsugu Mike,
MUFG holds around JPY 6 trillion worth of domestic Mitsubisi UFJ Trust CEO Mikio Ikegaya, and Mitsubishi
equities (JPY 2.3 trillion on an acquisition-cost basis plus UFJ Securities CEO Saburo Araki. Hirano, who is 67 years
unrealized gains of JPY 3.2 trillion), amounting to 45% of old, has led MUFG since April 2013.
its Tier 1 capital. Unlike loans or bonds that are repaid at
par, the value of these equities fluctuates in a volatile MUFG has been more conservative with its dividend
manner along with market prices. Under the final Basel payout policy than the other Japanese megabanks, paying
III rules, equities in principle carry risk weights of 250%, out an average of 25% of earnings over the past four years,
making them extremely capital-intensive for a bank to compared with 30% for SMFG and 31% for Mizuho, which
hold. Although some of these equities pay dividends has a smaller capital cushion. In our view, MUFG’s lower
higher than many of MUFG’s loans and might appear to payout ratio does not reflect an inferior attention to the
be acceptable investments on a non-risk-weighted basis, interests of shareholders, but rather MUFG’s more
relative to their capital consumption, it is difficult to justify conservative corporate culture. Rather than paying out a
holding these equities. MUFG, like the other two fixed percentage of each year’s earnings, Japanese banks
Japanese megabanks, has been steadily reducing its generally pay the same amount in yen each year until they
holdings since the early 2000s. MUFG’s medium-term are confident that a rise in earnings will be sustainable.
target for doing so is based on the ratio of the acquisition Thus, MUFG left its dividend at JPY 18 for three years and
cost of the equities (that is, not including unrealized gains) only increased the dividend to JPY 19 for the year ended
to Tier 1 capital. This ratio was 14.2% as of March 2018 March 2018 once its earnings recovered somewhat from
and MUFG aims to reduce it to about 10% by March 2021. the impact of the Bank of Japan’s introduction of its
The reason MUFG and its peers give for not reducing the negative-interest-rate policy in early 2016.
shareholdings even faster is that it is necessary to obtain
the consent of the management of the affected
companies, which can be difficult not only because the
management teams might prefer a stable shareholder like
MUFG, but also because the sale presumably could put
downward pressure on the share price.
Eight of MUFG’s 15 board members are independent

outside directors. We view as positive the fact that
outside directors comprise a majority--MUFG is the only
one of the three Japanese megabanks for which this is
the case at present--but nonetheless would wish to see
even more independent voices in the group’s oversight.
Two of the eight are non-Japanese: former M&A lawyer
Toby Myerson and former Bank of Thailand Governor
Tarisa Watanagase. Tsutomu Okuda, a former CEO of
retailer Daimaru, heads the nominating committee
responsible for choosing MUFG’s top leadership. Haruka
Matsuyama, a partner at Hibiya Park Law Offices, heads
the compensation committee. Akira Yamate, a former
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22:39, UTC 09:05, UTC
Mitsubishi UFJ Financial Group, or MUFG, reached a deal

Analyst Notes Archive to buy Commonwealth Bank of Australia's international
asset-management business Colonial First State Global
In Tough Japanese Banking Market, SMFG Looks Asset Management, or CFSGAM, which operates outside
Like the Best Bet for Future Returns Australia as First State Investments. We estimate
Michael Makdad, Eq. Analyst, 18 October 2018 CFSGAM will add around 2% to MUFG's total profit
We are transferring coverage of Japan's six largest starting in the year ending March 2020. We view it as
banking groups, all of which we rate as having no moat incrementally positive news for MUFG, and reiterate our
and a stable moat trend. This includes the three so-called no-moat rating and JPY 797 fair value estimate, 18%
"megabanks" that together account for 25% of above MUFG's current share price.
banking-system loans and 29% of deposits: Mitsubishi
UFJ Financial Group, or MUFG (8306 JP), Sumitomo Mitsui The cash purchase price of around AUD 4.0 billion values
Financial Group, or SMFG (8316 JP), and Mizuho Financial CFSGAM at 12.4 times EBITDA for the financial year ended
Group (8411 JP). It also includes three second-tier banks: June 2018 and 17.5 times pro forma net income. This is
Sumitomo Mitsui Trust (8309 JP), Resona (8308 JP), and not particularly cheap in our view, but we see it as
Japan Post Bank (7182 JP). Our top pick is SMFG, with reasonable given CFSGAM's exposure to the growing
33% upside from the current share price to our fair value Asian asset-management industry, where it is currently
estimate of JPY 5,960, based on our expectations for solid the third-largest firm by assets under management if
returns from its consumer finance and credit card Japan is excluded from the region and 10th largest in
businesses. Japan Post Bank has the most downside, with Asia-Pacific including Japan (the combined MUFG and
our fair value estimate of JPY 952 being 29% below the CFSGAM will leapfrog Sumitomo Mitsui Trust to become
current share price. the largest).
The environment for banks has been tough for years in MUFG management has been clear for several years now
Japan, and we expect it to remain so. Long-running that they have wanted to purchase a large overseas
deflation, which started in earnest in the late 1990s and asset-management firm in order to address MUFG's
has yet to end conclusively, has led to persistently low relatively low exposure to the asset-management
demand for credit. The loan/deposit ratio is only around segment compared with other large global banks, but we
55% at present, down from 74% in 2000. Japanese think MUFG had shied away from doing a big deal until
corporates, which in aggregate had a liabilities/net assets now owing to management's view that valuations in the
ratio of 4 times in the mid-1990s, have reduced this to a industry were too expensive to buy. We see MUFG as being
healthy 129% as of June, but companies continue to able to buy CFSGAM now without paying an excessive
prioritize using cash flow to pay down debt rather than premium only because Commonwealth Bank of Australia
aggressively making new investments. Individuals had decided anyway in June to spin off its
similarly are generally loath to borrow, given stagnant wealth-management and mortgage-broking business in
nominal incomes. With low demand for credit and a surfeit order to refocus on its core lending business in the wake
of liquid deposits, competition among banks has pushed of several scandals that exposed the Australian bank to
the average interest rate on new bank loans down by 100 closer regulatory scrutiny. The parties expect the
basis points over the past decade to below 0.7% at transaction to close in mid-2019 after they have obtained
present. While there are reasons to hope this has started required approvals.
to bottom out, a catalyst for a material rise in lending rates
is not apparent, especially with the Bank of Japan Higher-Than-Expected MUFG Profit Comes From
committed to keeping policy rates extremely low "for an Reversals of Credit Costs While Core Business
extended period." Struggles
Michael Makdad, Eq. Analyst, 13 November 2018
MUFG' Price for First State Seems Reasonable Mitsubishi UFJ Financial Group posted better-than-expected
Given Exposure to Growing Asian Asset- profit at the bottom line for the July-September quarter
Management Market owing to JPY 93 billion in write-backs of reserves for
Michael Makdad, Eq. Analyst, 30 October 2018 losses on loans to borrowers now judged to be less of a
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22:39, UTC 09:05, UTC
risk, but excluding one-time factors, it was another for MUFG's various securities operations. More than 90%
difficult quarter for MUFG. Strong returns from equity of the profit of Mitsubishi UFJ Securities Holdings comes
method affiliate Morgan Stanley, which contributed 20% from MUFG's Japanese joint ventures with Morgan
of total profit during the period, and growth at Thai Stanley, which generate around 4-5% of MUFG's total net
subsidiary Bank of Ayudhya could not compensate for the profit. Separately, another 15% or so of MUFG's total net
shrinking trend in the core domestic banking business. profit comes as equity-method revenue from its 24% stake
in Morgan Stanley. Hence, we see the kabu.com business
Net revenue dropped 6.4% year on year, a faster rate of as quite peripheral to MUFG's core strategy for its
decline than the previous quarter’s 6.1%, as net interest securities business, which hinges on collaboration with
income slid 4.2% and net fees were down 4.9% year on Morgan Stanley in Japan and for cross-border business.
year. With operating expenses up slightly, preprovision Unlike in the mid-2000s when MUFG bought kabu.com,
operating profit fell 20% year on year, compared with an the firm now also appears to us to be ex-growth. Its share
18% fall in the previous quarter. MUFG raised its overly of retail trading value has topped out around 9% while
conservative full-year guidance to net profit of JPY 950 leaders SBI Securities and Rakuten Securities continue to
billion from JPY 850 billion, but the new guidance still take share and together control more than half the market.
only implies a return on equity of 3.7% in the second fiscal
half, given that MUFG already earned more than JPY 650 Jibun Bank, already a 50-50 joint venture with KDDI, is
billion in the first two quarters. even smaller in terms of its contribution to MUFG,
generating only about 0.1% of total net profit. Although
The group declared an interim dividend of JPY 11 per it has more than 3 million customer accounts, the size of
share, up from JPY 9 in last year’s first half, although even its customer deposits is still only around JPY 1 trillion, a
with the boost, MUFG’s dividend yield of 3.3% is still fraction of rival Internet banks SBI Sumishin, DaiwaNext,
below the 3.8% and 3.9% yields of Japan’s other two Sony Bank and Rakuten Bank. In our view, the participation
megabanks. Instead, MUFG has been an active in ownership of such a second-tier Internet bank has barely
repurchaser of its shares. It most recently announced contributed to MUFG's strategy to adapt its retail business
plans to buy back up to JPY 100 billion in the second fiscal for the Internet era and potentially created conflicts, so a
half, which when combined with the JPY 50 billion sale to KDDI would seem appropriate.
repurchased in the first half would put the group on pace
to maintain the average of the past four years (1.7% of MUFG Also Reports Modest Uptick in Credit Costs
shares outstanding annually) in the current fiscal year. in 3Q; We Prefer SMFG
Combined with the 3.3% dividend yield, this represents a Michael Makdad, Eq. Analyst, 04 February 2019
total shareholder return yield of around 5%. We maintain Mitsubishi UFJ Financial Group (MUFG) reported
our no-moat rating and JPY 797 fair value estimate, which October-December results similar to those reported by
is 0.64 times book value and 20% above the current price. Sumitomo Mitsui Financial Group (SMFG) last week.
Similar to SMFG achieving 24% of full-year net profit
Sale of Kabu and Jibun Stakes Would Aid Flexibility guidance of JPY 700 billion after 32% and 35% in the
of MUFG Internet Strategy Without Giving Up Much fiscal first and second quarters (cumulative progression
Michael Makdad, Eq. Analyst, 23 January 2019 of 91%), MUFG achieved 23% of its full-year net profit
The Nikkei reported that Mitsubishi UFJ Financial Group, guidance of JPY 950 billion after 33% and 35% in the
or MUFG, is holding negotiations to sell some of its stakes same period (cumulative progression of 92%). MUFG’s
in Internet brokerage kabu.com and Internet-only bank annualized MUFG's ROE declined sequentially from 8.4%
Jibun Bank to mobile carrier KDDI. If these sales to KDDI in the previous quarter to 5.5% for October-December,
take place, they would not affect our fair value estimate similar to SMFG’s decline from 9.3% to 6.2%.
for MUFG, which remains JPY 797, 0.64 times book value
and 38% above yesterday's closing price. Like SMFG, MUFG saw a modest reappearance of credit
costs this quarter after net write-backs in previous
Kabu.com generates about 0.4% of MUFG's total net quarters, at 18 basis points of loans on an annualized
profit and 10% of the net profit of Mitsubishi UFJ basis, versus SMFG’s 24 basis points. We think these
Securities Holdings, the intermediate holding company credit costs are mainly attributable to overseas loans, as
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22:39, UTC 09:05, UTC
rising USD interest rates and factors such as lower oil

prices affected some borrowers. In terms of details where
MUFG’s results differed from SMFG’s, MUFG reported a
stronger top line, likely reflecting its larger overseas
exposure, with net interest income up 4.3% year on year
and total net revenue up 3%, but unlike SMFG that
reduced expenses 7%, MUFG’s expenses in yen terms
increased slightly, up 1% year over year.
By segment, MUFG’s preprovision operating profit grew

in Japanese corporate & investment banking (up 9%),
global corporate & investment banking (up 12%), and at
its large overseas subsidiaries that include Union Bank in
California and Krungsri in Thailand (up 11%). Asset
management grew 1% and domestic retail and
small-business banking declined 20%.
We maintain our no-moat rating and fair value estimate

of JPY 797 and USD 7.12 for MUFG. Although there is
38% upside to our valuation from today’s close, we
continue to prefer SMFG slightly. There is 45% upside to
our valuation for SMFG, and it has a stronger outlook for
dividend growth than MUFG, in our view.
?
Quantitative Equity Report | Release: 04 Feb 2019, 08:09, GMT-06:00 | Reporting Currency: JPY | Trading Currency: USD | Exchange:XNYS Page
Page 7 of1 14
of 1
Mitsubishi UFJ Financial Group Inc ADR MUFG QQQQ 04 Feb 2019 02:00 UTC
Last Close Fair ValueQ Market Cap Sector Industry Country of Domicile
01 Feb 2019 04 Feb 2019 02:00 UTC 01 Feb 2019
5.25 5.98 68,074.3 Mil y Financial Services Banks - Global JPN Japan
There is no one analyst in which a Quantitative Fair Value Estimate and Quantitative
Star Rating are attributed to; however, Mr. Lee Davidson, Head of Quantitative
Price vs. Quantitative Fair Value
Research for Morningstar, Inc., is responsible for overseeing the methodology that 2015 2016 2017 2018 2019 2020 Quantitative Fair Value Estimate
supports the quantitative fair value. As an employee of Morningstar, Inc., Mr. Total Return
Davidson is guided by Morningstar, Inc.’s Code of Ethics and Personal Securities
Trading Policy in carrying out his responsibilities. For information regarding Conflicts Sales/Share
10
of Interests, visit http://global.morningstar.com/equitydisclosures Forecast Range
Forcasted Price
8 Dividend
Company Profile
Split
MUFG is the largest bank in Japan in terms of market Momentum: —
6
capitalization and assets with a share of all domestic loans an Standard Deviation: 26.12
9.4% as of March 2018. It is the largest non-Chinese bank Liquidity: High
4
group globally and has a balance sheet slightly larger than
those of JPMorgan Chase (JPM US) and HSBC Holdings 4.64 52-Wk 7.50
(HSBA LN). MUFG’s operations in Japan accounted for 61% of 2
its preprovision operating profit in the year ended March 3.86 5-Yr 8.11
2018, with the U.S. contributing about 15%. In the U.S.,
15.1 1.7 20.6 -30.4 7.8 Total Return %
MUFG’s wholly owned Union Bank (unlisted) subsidiary is
14.4 -10.7 -0.9 -25.4 -0.9 +/– Market (Morningstar US Index)
Quantitative Scores Scores 2.34 2.70 2.20 3.85 3.57 Trailing Dividend Yield %
All Rel Sector Rel Country 2.35 2.57 2.20 3.85 3.57 Forward Dividend Yield %
Quantitative Moat None 50 39 67 7.0 12.5 55.9 5.7 7.6 Price/Earnings
Valuation Undervalued 33 48 31 2.3 2.4 3.8 2.0 2.2 Price/Revenue
Quantitative Uncertainty High 84 86 77 Morningstar RatingQ
Financial Health Strong 100 87 99 QQQQQ
QQQQ
QQQ
MUFG QQ
y
JPN
Q
2014 2015 2016 2017 2018 TTM Financials (Fiscal Year in Bil)
Undervalued Fairly Valued Overvalued 3,450 4,655 4,207 2,946 3,640 3,414 Revenue
Source: Morningstar Equity Research -6.0 34.9 -9.6 -30.0 23.5 -6.2 % Change
— — — — — — Operating Income
— — — — — — % Change
Valuation Sector Country
Current 5-Yr Avg Median Median 1,015 1,531 802 203 1,228 991 Net Income
Price/Quant Fair Value 0.88 0.94 0.87 0.86 909 2,385 4,181 685 -564 387 Operating Cash Flow
Price/Earnings 7.6 15.6 12.7 15.4 -370 -374 -362 -354 -399 -411 Capital Spending
Forward P/E 7.7 — 10.5 14.1 539 2,011 3,819 331 -963 -24 Free Cash Flow
Price/Cash Flow 19.5 6.1 9.5 9.7 15.6 43.2 90.8 11.2 -26.4 -0.7 % Sales
Price/Free Cash Flow — 10.2 10.9 18.3 69.98 107.50 57.51 14.68 92.10 75.06 EPS
Trailing Dividend Yield % 3.57 2.81 3.64 1.84 -5.6 53.6 -46.5 -74.5 527.4 -18.5 % Change
Price/Book 0.5 0.7 1.1 1.2 -0.46 -0.24 2.14 2.03 -2.00 -0.02 Free Cash Flow/Share
Price/Sales 2.2 2.5 2.9 0.8 15.25 16.82 18.58 16.97 18.63 20.65 Dividends/Share
7.46 7.71 9.28 9.30 10.49 10.82 Book Value/Share
Profitability Sector Country 14,018 13,789 13,430 13,163 12,959 12,959 Shares Outstanding (Mil)
Current 5-Yr Avg Median Median
Profitability
Return on Equity % 6.6 7.1 10.1 9.2
9.1 11.5 5.5 1.4 8.5 6.6 Return on Equity %
Return on Assets % 0.3 0.3 1.4 4.3
0.4 0.6 0.3 0.1 0.4 0.3 Return on Assets %
Revenue/Employee (Mil) 30.7 28.6 0.8 32.0
28.8 32.7 19.1 6.9 33.8 29.0 Net Margin %
0.01 0.02 0.01 0.01 0.01 0.01 Asset Turnover
Financial Health Sector Country
Current 5-Yr Avg Median Median 21.6 19.1 20.5 21.2 20.1 19.6 Financial Leverage
Distance to Default 0.9 0.8 0.8 0.7 — — — — — — Gross Margin %
Solvency Score — — 503.7 430.9 — — — — — — Operating Margin %
Assets/Equity 20.1 20.3 3.7 1.9 14,499 19,969 21,972 26,115 27,051 27,881 Long-Term Debt
Long-Term Debt/Equity 1.8 1.6 0.3 0.2 12,205 14,679 14,271 13,986 14,970 15,286 Total Equity
3.0 4.2 4.2 2.9 3.6 3.4 Fixed Asset Turns
Growth Per Share Quarterly Revenue & EPS Revenue Growth Year On Year %
1-Year 3-Year 5-Year 10-Year Revenue (Bil) Jun Sep Dec Mar Total
Revenue % 23.5 -7.9 -0.2 -1.2 2018 1,081.6 880.7 — — 3,639.5
Operating Income % — — — — 2017 — 2,095.5 — 850.9 2,946.3 -3.3
Earnings % 527.4 -5.0 4.4 — 2016 — 1,632.9 — 2,573.9 4,206.8

Dividends % 9.7 3.5 8.6 3.1 2015 — 2,294.1 — 2,361.4 4,655.5
Book Value % 9.2 2.8 9.6 4.1 Earnings Per Share ()
Stock Total Return % -30.6 6.0 0.1 2.1 2018 21.75 37.30 — — 92.10
2017 — 54.84 — -40.16 14.68
-21.5
2016 — 27.19 — 30.32 57.51
2016 2017 2018
2015 — 58.35 — 49.15 107.50
© Morningstar 2019. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and ®
opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore is not an offer to buy or sell a security; are not warranted to be correct, complete or accurate; and
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Research Methodology for Valuing Companies

Qualitative Equity Research Overview intangible assets, switching costs, network effect, cost Our model is divided into three distinct stages:
At the heart of our valuation system is a detailed projection advantage, and efficient scale.
of a company's future cash flows, resulting from our Stage I: Explicit Forecast
analysts' research. Analysts create custom industry and Companies with a narrow moat are those we believe In this stage, which can last five to 10 years, analysts
company assumptions to feed income statement, balance are more likely than not to achieve normalized excess make full financial statement forecasts, including items
sheet, and capital investment assumptions into our globally returns for at least the next 10 years. Wide-moat such as revenue, profit margins, tax rates, changes in
standardized, proprietary discounted cash flow, or DCF, companies are those in which we have very high working-capital accounts, and capital spending. Based
modeling templates. We use scenario analysis, in-depth confidence that excess returns will remain for 10 years, on these projections, we calculate earnings before
competitive advantage analysis, and a variety of other with excess returns more likely than not to remain for at interest, after taxes, or EBI, and the net new
analytical tools to augment this process. We believe this least 20 years. The longer a firm generates economic investment, or NNI, to derive our annual free cash flow
bottom-up, long-term, fundamentally based approach profits, the higher its intrinsic value. We believe low- forecast.
allows our analysts to focus on long-term business drivers, quality no-moat companies will see their normalized
which have the greatest valuation impact, rather than short- returns gravitate toward the firm's cost of capital more Stage II: Fade
term market noise. quickly than companies with moats. The second stage of our model is the period it will take
the company's return on new invested capital—the
Morningstar's equity research group (“we," "our") believes To assess the direction of the underlying competitive return on capital of the next dollar invested ("RONIC")—
that a company's intrinsic worth results from the future advantages, analysts perform ongoing assessments of to decline (or rise) to its cost of capital. During the Stage
cash flows it can generate. The Morningstar Rating for the moat trend. A firm's moat trend is positive in cases II period, we use a formula to approximate cash flows in
stocks identifies stocks trading at an uncertainty-adjusted where we think its sources of competitive advantage lieu of explicitly modeling the income statement,
discount or premium to their intrinsic worth—or fair value are growing stronger; stable where we don't anticipate balance sheet, and cash flow statement as we do in
estimate, in Morningstar terminology. Five-star stocks sell changes to competitive advantages over the next Stage I. The length of the second stage depends on the
for the biggest risk-adjusted discount to their fair values several years; or negative when we see signs of strength of the company's economic moat. We forecast
whereas 1-star stocks trade at premiums to their intrinsic deterioration. this period to last anywhere from one year (for
worth. companies with no economic moat) to 10–15 years or
All the moat and moat trend ratings undergo periodic more (for wide-moat companies). During this period,
Four key components drive the Morningstar rating: (1) our review and any changes must be approved by the cash flows are forecast using four assumptions: an
assessment of the firm's economic moat, (2) our estimate of Morningstar Economic Moat Committee, comprised of average growth rate for EBI over the period, a
the stock's fair value, (3) our uncertainty around that fair senior members of Morningstar's equity research normalized investment rate, average return on new
value estimate and (4) the current market price. This department. invested capital, or RONIC, and the number of years
process ultimately culminates in our single-point star rating. until perpetuity, when excess returns cease. The
2. Estimated Fair Value investment rate and return on new invested capital
1. Economic Moat Combining our analysts' financial forecasts with the decline until the perpetuity stage is reached. In the case
The concept of an economic moat plays a vital role not firm's economic moat helps us assess how long returns of firms that do not earn their cost of capital, we
only in our qualitative assessment of a firm's long-term on invested capital are likely to exceed the firm's cost of assume marginal ROICs rise to the firm's cost of capital
investment potential, but also in the actual calculation capital. Returns of firms with a wide economic moat (usually attributable to less reinvestment), and we may
of our fair value estimates. An economic moat is a rating are assumed to fade to the perpetuity period over truncate the second stage.
structural feature that allows a firm to sustain excess a longer period of time than the returns of narrow-moat
profits over a long period of time. We define excess firms, and both will fade slower than no-moat firms, Stage III: Perpetuity
economic profits as returns on invested capital (or ROIC) increasing our estimate of their intrinsic value. Once a company's marginal ROIC hits its cost of capital,
over and above our estimate of a firm's cost of capital, we calculate a continuing value, using a standard
or weighted average cost of capital (or WACC). Without perpetuity formula. At perpetuity, we assume that any
a moat, profits are more susceptible to competition. We growth or decline or investment in the business neither
have identified five sources of economic moats: creates nor destroys value and that any new investment
provides a return in line with estimated WACC.
Morningstar Research Methodology for Valuing Companies Because a dollar earned today is worth more than a
dollar earned tomorrow, we discount our projections of
cash flows in stages I, II, and III to arrive at a total
present value of expected future cash flows. Because we
are modeling free cash flow to the firm—representing cash
available to provide a return to all capital providers—we
discount future cash flows using the WACC, which is a
weighted average of the costs of equity, debt, and preferred
stock (and any other funding sources), using expected
future proportionate long-term market-value weights.
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3. Uncertainty Around That Fair Value Estimate Morningstar Equity Research Star Rating Methodology
Morningstar's Uncertainty Rating captures a range of likely
potential intrinsic values for a company and uses it to
assign the margin of safety required before investing, which
in turn explicitly drives our stock star rating system. The
Uncertainty Rating represents the analysts' ability to bound
the estimated value of the shares in a company around the
fair value estimate, based on the characteristics of the
business underlying the stock, including operating and
financial leverage, sales sensitivity to the overall
economy, product concentration, pricing power, and
other company-specific factors.
Analysts consider at least two scenarios in addition to

their base case: a bull case and a bear case.
Assumptions are chosen such that the analyst believes
there is a 25% probability that the company will perform
better than the bull case, and a 25% probability that the
company will perform worse than the bear case. The
distance between the bull and bear cases is an
important indicator of the uncertainty underlying the
fair value estimate.
Our recommended margin of safety widens as our

uncertainty of the estimated value of the equity
increases. The more uncertain we are about the
estimated value of the equity, the greater the discount
we require relative to our estimate of the value of the
firm before we would recommend the purchase of the Morningstar Star Rating for Stocks The Morningstar Star Ratings for stocks are defined below:
shares. In addition, the uncertainty rating provides Once we determine the fair value estimate of a stock, we
guidance in portfolio construction based on risk compare it with the stock's current market price on a daily QQQQQ We believe appreciation beyond a fair risk-
tolerance. basis, and the star rating is automatically re-calculated at adjusted return is highly likely over a multiyear time frame.
the market close on every day the market on which the The current market price represents an excessively
Our uncertainty ratings for our qualitative analysis are stock is listed is open. pessimistic outlook, limiting downside risk and maximizing
low, medium, high, very high, and extreme. Please note, there is no predefined distribution of stars. upside potential.
That is, the percentage of stocks that earn 5 stars can
× Low–margin of safety for 5-star rating is a 20% discount fluctuate daily, so the star ratings, in the aggregate, can QQQQ We believe appreciation beyond a fair risk-
and for 1-star rating is 25% premium. serve as a gauge of the broader market's valuation. When adjusted return is likely.
× Medium–margin of safety for 5-star rating is a 30% there are many 5-star stocks, the stock market as a whole is
discount and for 1-star rating is 35% premium. more undervalued, in our opinion, than when very few QQQ Indicates our belief that investors are likely to
× High–margin of safety for 5-star rating is a 40% discount companies garner our highest rating. receive a fair risk-adjusted return (approximately cost of
and for 1-star rating is 55% premium. equity).
× Very High–margin of safety for 5-star rating is a 50% We expect that if our base-case assumptions are true the
discount and for 1-star rating is 75% premium. market price will converge on our fair value estimate over QQ We believe investors are likely to receive a less than
× Extreme–margin of safety for 5-star rating is a 75% time, generally within three years (although it is impossible fair risk-adjusted return.
discount and for 1-star rating is 300% premium. to predict the exact time frame in which market prices may
adjust). Q Indicates a high probability of undesirable risk-adjusted
4. Market Price returns from the current market price over a multiyear time
The market prices used in this analysis and noted in the Our star ratings are guideposts to a broad audience and frame, based on our analysis. The market is pricing in an
report come from exchange on which the stock is listed, individuals must consider their own specific investment excessively optimistic outlook, limiting upside potential and
which we believe is a reliable source. goals, risk tolerance, tax situation, time horizon, income leaving the investor exposed to Capital loss.
needs, and complete investment portfolio, among other
For more details about our methodology, please go to factors.
https://shareholders.morningstar.com.
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Other Definitions quantitative report and the quantitative ratings, there is no Value Estimate, current market price, and the Quantitative
one analyst in which a given report is attributed to; Uncertainty Rating. The rating is expressed as 1-Star, 2-Star,
Last Price: Price of the stock as of the close of the market however, Mr. Lee Davidson, Head of Quantitative Research 3-Star, 4-Star, and 5-Star.
of the last trading day before date of the report. for Morningstar, Inc., is responsible for overseeing the
methodology that supports the quantitative equity ratings Q: the stock is overvalued with a reasonable margin of
Stewardship Rating: Represents our assessment of used in this report. As an employee of Morningstar, Inc., safety.
management's stewardship of shareholder capital, with Mr. Davidson is guided by Morningstar, Inc.'s Code of Ethics Log (Quant FVE/Price)<–1*Quantitative Uncertainty
particular emphasis on capital allocation decisions. Analysts and Personal Securities Trading Policy in carrying out his
consider companies' investment strategy and valuation, responsibilities. QQ: the stock is somewhat overvalued.
financial leverage, dividend and share buyback policies, Log (Quant FVE/Price) between (–1*Quantitative
execution, compensation, related party transactions, and Quantitative Equity Ratings Uncertainty, –0.5*Quantitative Uncertainty)
accounting practices. Corporate governance practices are Morningstar's quantitative equity ratings consist of:
only considered if they've had a demonstrated impact on (i) Quantitative Fair Value Estimate QQQ: the stock is approximately fairly valued.
shareholder value. Analysts assign one of three ratings: (ii) Quantitative Star Rating Log (Quant FVE/Price) between (–0.5*Quantitative
"Exemplary," "Standard," and "Poor." Analysts judge (iii) Quantitative Uncertainty Uncertainty, 0.5*Quantitative Uncertainty)
stewardship from an equity holder's perspective. Ratings (iv) Quantitative Economic Moat
are determined on an absolute basis. Most companies will (v) Quantitative Financial Health QQQQ: the stock is somewhat undervalued.
receive a Standard rating, and this is the default rating in (collectively the "Quantitative Ratings"). Log (Quant FVE/Price) between (0.5*Quantitative
the absence of evidence that managers have made Uncertainty, 1*Quantitative Uncertainty)
exceptionally strong or poor capital allocation decisions. The Quantitative Ratings are calculated daily and derived
from the analyst-driven ratings of a company's peers as QQQQQ: the stock is undervalued with a reasonable
Quantitative Valuation: Using the below terms, intended to determined by statistical algorithms. Morningstar, Inc. margin of safety. Log (Quant FVE/Price) >1*Quantitative
denote the relationship between the security's Last Price ("“Morningstar," "we," "our") calculates Quantitative Uncertainty
and Morningstar's quantitative fair value estimate for that Ratings for companies whether it already provides analyst
security. ratings and qualitative coverage. In some cases, the Quantitative Uncertainty: Intended to represent
Quantitative Ratings may differ from the analyst ratings Morningstar's level of uncertainty about the accuracy of the
× Undervalued: Last Price is below Morningstar's because a company's analyst-driven ratings can quantitative fair value estimate. Generally, the lower the
quantitative fair value estimate. significantly differ from other companies in its peer group. quantitative Uncertainty, the narrower the potential range
× Fairly Valued: Last Price is in line with Morningstar's of outcomes for that particular company. The rating is
quantitative fair value estimate. Quantitative Fair Value Estimate: Intended to represent expressed as Low, Medium, High, Very High, and Extreme.
× Overvalued: Last Price is above Morningstar's Morningstar's estimate of the per share dollar amount that
quantitative fair value estimate. a company's equity is worth today. Morningstar calculates × Low: the interquartile range for possible fair values is less
the quantitative fair value estimate using a statistical model than 10%.
Risk Warning derived from the fair value estimate Morningstar's equity × Medium: the interquartile range for possible fair values is
Please note that investments in securities are subject to analysts assign to companies. Please go to less than 15% but greater than 10%.
market and other risks and there is no assurance or https://shareholders.morningstar.com for information about × High: the interquartile range for possible fair values is
guarantee that the intended investment objectives will be fair value estimates Morningstar's equity analysts assign to less than 35% but greater than 15%.
achieved. Past performance of a security may or may not be companies. × Very High: the interquartile range for possible fair values
sustained in future and is no indication of future is less than 80% but greater than 35%.
performance. A security investment return and an investor's Quantitative Economic Moat: Intended to describe the × Extreme: the interquartile range for possible fair values is
principal value will fluctuate so that, when redeemed, an strength of a firm's competitive position. It is calculated greater than 80%.
investor's shares may be worth more or less than their using an algorithm designed to predict the Economic Moat
original cost. A security's current investment performance rating a Morningstar analyst would assign to the stock. The Quantitative Financial Health: Intended to reflect the
may be lower or higher than the investment performance rating is expressed as Narrow, Wide, or None. probability that a firm will face financial distress in the near
noted within the report. Morningstar's Uncertainty Rating future. The calculation uses a predictive model designed to
serves as a useful data point with respect to sensitivity × Narrow: assigned when the probability of a stock anticipate when a company may default on its financial
analysis of the assumptions used in our determining a fair receiving a "Wide Moat" rating by an analyst is greater obligations. The rating is expressed as Weak, Moderate,
value price. than 70% but less than 99%. and Strong.
× Wide: assigned when the probability of a stock receiving
Quantitative Equity Reports Overview a "Wide Moat" rating by an analyst is greater than 99%. × Weak: assigned when Quantitative Financial Health <0.2
The quantitative report on equities consists of data, × None: assigned when the probability of an analyst × Moderate: assigned when Quantitative Financial Health
statistics and quantitative equity ratings on equity receiving a "Wide Moat" rating by an analyst is less than is between 0.2 and 0.7
securities. Morningstar, Inc.'s quantitative equity ratings are 70%. × Strong: assigned when Quantitative Financial Health >0.7
forward looking and are generated by a statistical model
that is based on Morningstar Inc.'s analyst-driven equity Quantitative Star Rating: Intended to be the summary
ratings and quantitative statistics. Given the nature of the rating based on the combination of our Quantitative Fair
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Other Definitions
Last Close: Price of the stock as of the close of the market

of the last trading day before date of the report.
Quantitative Valuation: Using the below terms, intended to

denote the relationship between the security's Last Price
and Morningstar's quantitative fair value estimate for that
security.
× Undervalued: Last Price is below Morningstar's

quantitative fair value estimate.
× Fairly Valued: Last Price is in line with Morningstar's
× Overvalued: Last Price is above Morningstar's
This Report has not been made available to the issuer of the
security prior to publication.
Risk Warning
Please note that investments in securities are subject to
market and other risks and there is no assurance or
guarantee that the intended investment objectives will be
achieved. Past performance of a security may or may not be
sustained in future and is no indication of future
performance. A security investment return and an investor's
principal value will fluctuate so that, when redeemed, an
investor's shares may be worth more or less than their
original cost. A security's current investment performance
may be lower or higher than the investment performance
noted within the report.
The quantitative equity ratings are not statements of fact.

Morningstar does not guarantee the completeness or
accuracy of the assumptions or models used in determining
the quantitative equity ratings. In addition, there is the risk
that the price target will not be met due to such things as
unforeseen changes in demand for the company's products,
changes in management, technology, economic
development, interest rate development, operating and/or
material costs, competitive pressure, supervisory law,
exchange rate, and tax rate. For investments in foreign
markets there are further risks, generally based on
exchange rate changes or changes in political and social
conditions.
A change in the fundamental factors underlying the

quantitative equity ratings can mean that the valuation is
subsequently no longer accurate.
For more information about Morningstar's quantitative

methodology, please visit
http://global.morningstar.com/equitydisclosures.
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22:39, UTC 09:05, UTC
General Disclosure
The analysis within this report is prepared by the person
(s) noted in their capacity as an analyst for Morningstar’s
equity research group. The equity research group
consists of various Morningstar, Inc. subsidiaries
(“Equity Research Group)”. In the United States, that
subsidiary is Morningstar Research Services LLC, which
is registered with and governed by the U.S. Securities
and Exchange Commission.
The opinions expressed within the report are given in

good faith, are as of the date of the report and are
subject to change without notice. Neither the analyst
nor Equity Research Group commits themselves in
advance to whether and in which intervals updates to
the report are expected to be made. The written analysis
and Morningstar Star Rating for stocks are statements the Report and are subject to change. While financial situation or particular needs of any specific
of opinions; they are not statements of fact. Morningstar has obtained data, statistics and recipient. This publication is intended to provide
information from sources it believes to be reliable, information to assist institutional investors in making
The Equity Research Group believes its analysts make Morningstar does not perform an audit or seeks their own investment decisions, not to provide
a reasonable effort to carefully research information independent verification of any of the data, statistics, investment advice to any specific investor. Therefore,
contained in the analysis. The information on which the and information it receives. investments discussed and recommendations made
analysis is based has been obtained from sources herein may not be suitable for all investors: recipients
believed to be reliable such as, for example, the The quantitative equity ratings are not a market call, must exercise their own independent judgment as to
company’s financial statements filed with a regulator, and do not replace the User or User’s clients from the suitability of such investments and recommendations
company website, Bloomberg and any other the conducting their own due-diligence on the security. The in the light of their own investment objectives,
relevant press sources. Only the information obtained quantitative equity rating is not a suitability experience, taxation status and financial position.
from such sources is made available to the issuer who assessment; such assessments take into account may
is the subject of the analysis, which is necessary to factors including a person’s investment objective, The information, data, analyses and opinions presented
properly reconcile with the facts. Should this sharing of personal and financial situation, and risk tolerance all herein are not warranted to be accurate, correct,
information result in considerable changes, a statement of which are factors the quantitative equity rating complete or timely. Unless otherwise provided in a
of that fact will be noted within the report. While the statistical model does not and did not consider. separate agreement, neither Morningstar, Inc. or the
Equity Research Group has obtained data, statistics and Equity Research Group represents that the report
information from sources it believes to be reliable, Prices noted with the Report are the closing prices on contents meet all of the presentation and/or disclosure
neither the Equity Research Group nor Morningstar, Inc. the last stock-market trading day before the publication standards applicable in the jurisdiction the recipient is
performs an audit or seeks independent verification of date stated, unless another point in time is explicitly located.
any of the data, statistics, and information it receives. stated.
Except as otherwise required by law or provided for in
General Quantitative Disclosure General Disclosure (applicable to both Quantitative a separate agreement, the analyst, Morningstar, Inc.
The Quantitative Equity Report (“Report”) is derived and Qualitative Research) and the Equity Research Group and their officers,
from data, statistics and information within Unless otherwise provided in a separate agreement, directors and employees shall not be responsible or
Morningstar, Inc.’s database as of the date of the Report recipients accessing this report may only use it in the liable for any trading decisions, damages or other
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for informational purposes only, intended for financial Unless stated otherwise, the original distributor of the data, analyses or opinions within the report. The Equity
professionals and/or sophisticated investors (“Users”) report is Morningstar Research Services LLC, a U.S.A. Research Group encourages recipients of this report to
and should not be the sole piece of information used by domiciled financial institution. read all relevant issue documents (e.g., prospectus)
such Users or their clients in making an investment pertaining to the security concerned, including without
decision. The quantitative equity ratings noted the This report is for informational purposes only and has limitation, information relevant to its investment
Report are provided in good faith, are as of the date of no regard to the specific investment objectives, objectives, risks, and costs before making an
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22:39, UTC 09:05, UTC
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The Research Analyst has not served as an officer,

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market making activity for the fund company.
*The Conflicts of Interest disclosure above also applies

to relatives and associates of Manager Research
Analysts in India # The Conflicts of Interest disclosure
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Mitsubishi UFJ Financial Group Inc MUFG (XNYS) : MUFG Also Reports Modest Uptick in Credit Costs in 3Q We Prefer SMFG

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Mitsubishi UFJ Financial Group Inc MUFG (XNYS) : MUFG Also Reports Modest Uptick in Credit Costs in 3Q We Prefer SMFG

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Morningstar Equity Analyst Report | Report as of 04 Feb 2019 02:09, UTC | Page 1 of 14

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Morningstar Pillars Analyst Quantitative Important Disclosure:

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Eight of MUFG’s 15 board members are independent

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Mitsubishi UFJ Financial Group, or MUFG, reached a deal

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

rising USD interest rates and factors such as lower oil

By segment, MUFG’s preprovision operating profit grew

We maintain our no-moat rating and fair value estimate

Earnings % 527.4 -5.0 4.4 — 2016 — 1,632.9 — 2,573.9 4,206.8

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

Analysts consider at least two scenarios in addition to

Our recommended margin of safety widens as our

Research Methodology for Valuing Companies

Research Methodology for Valuing Companies

Last Close: Price of the stock as of the close of the market

Quantitative Valuation: Using the below terms, intended to

× Undervalued: Last Price is below Morningstar's

The quantitative equity ratings are not statements of fact.

A change in the fundamental factors underlying the

For more information about Morningstar's quantitative

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

The opinions expressed within the report are given in

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

Mitsubishi UFJ Financial Group Inc MUFG (XNYS)

SEBI or any other legal/regulatory body. Morningstar

The Research Analyst has not served as an officer,

*The Conflicts of Interest disclosure above also applies

For recipients in Japan: The Report is distributed by

For recipients in Singapore: This Report is

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