MUFG weighs share buybacks to boost returns as cash grows

Bloomberg

Japan’s biggest bank sees value in further share buybacks as its $7.5 billion deal to sell a US regional lender adds to a growing cash pile.
“We are always looking for growth investment opportunities,” Hironori Kamezawa, chief executive officer of Mitsubishi UFJ Financial Group Inc, said in an interview, adding that the lender will consider acquisitions in Asia and the US. “Unfortunately, buying our own shares is a very good investment, because they are cheap.”
Kamezawa’s comments underscore the challenges facing Japan’s biggest banks as they weigh how to invest billions of dollars in profits amid ultra-low interest rates and tepid loan demand at home. MUFG has said it will spend around half of its expected ¥2 trillion ($15.2 billion) or more in net income over two years on buybacks or investing for growth. That number includes additional capital created by the sale of MUFG Union Bank to US Bancorp, which closed earlier this month.
Profitability could get an unexpected boost from the Bank of Japan, which tweaked its yield curve control program earlier this week, raising hopes of further changes that would benefit financial firms, which have seen their interest income crushed by years of rock-bottom rates.
While MUFG’s roughly 39% share gain this year outperforms the benchmark Topix index, it still trades at 0.64 times book value, a valuation gap that is common to Japanese financial firms.
In November, MUFG said it will buy back up to ¥150 billion of shares, on top of ¥300 billion announced earlier this year.