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MUFG Bank Records One-Time ’Extraordinary Losses’ as Shares in Asian Commercial Banks Plunge

March 31, 2020, 09:09 AM
Filed Under: Banking News
Related: MUFG

MUFG announced that it recorded extraordinary losses associated with a one-time amortization of goodwill ("amortization") in its consolidated financial statements for the fiscal year ending March 31, 2020 following impairment losses on shares of PT Bank Danamon Indonesia, Tbk., a major commercial bank in the Republic of Indonesia, and Bank of Ayudhya Public Company Limited, a major commercial bank in the Kingdom of Thailand, both consolidated subsidiaries of MUFG’s core banking subsidiary MUFG Bank.

MUFG and MUFG Bank have strengthened their commercial banking business through the establishment of business platforms across Southeast Asia via strategic investments and other measures. The strategic investments in Bank Danamon and Bank of Ayudhya ("both banks") were made in April 2019 December 2013, respectively, making them consolidated subsidiaries of MUFG and MUFG Bank. Currently, MUFG Bank holds 94.1% and 76.9% of both banks’ common shares, respectively.

The market values of both banks’ shares as of March 31, 2020 were down 50% or more from their purchase costs, and MUFG Bank is treating the decrease in stock value as an impairment loss. As a result, MUFG has decided to record the amortization on its consolidated financial statements on the basis of provisions contained in the Practical Guidelines for Consolidation Procedures in the Consolidated Financial Statements.

The effect of this amortization on profits attributable to owners of parent for the full fiscal year ending March 31, 2020 (under J-GAAP) is expected to be JPY212.8 billion at Bank Danamon[1] and JPY130.5 billion at Bank of Ayudhya.

The impact of this on MUFG’s business performance target for the fiscal year ending March 31, 2020, is currently being examined, including the effects of sudden fluctuations in interest rates, stock prices, and oil prices, in addition to extraordinary losses due to this amortization. Should any matters which warrant disclosure arise, they will be disclosed promptly.

Both banks boast extensive and robust business bases in Southeast Asia as well as a high level of profitability, and they play extremely important roles in MUFG’s global commercial banking (GCB) business strategy. There will be no change in MUFG’s GCB business strategy, which includes both banks, despite posting these losses. Going forward, MUFG will drive further synergies and pursue the provision of comprehensive financial services to customers doing business in the Southeast Asian market, as well as contributing to the growth of the region’s economy.

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