Thank you very much for waiting. We will now begin Mitsubishi UFJ Financial Group briefing on the financial highlights for the fiscal year ended March 31, 2024. Thank you very much for joining us today. I am [Nakao] from Investor Relations office, Financial Planning, and I will be your moderator today. First, Mr. Jun Togawa, Representative Corporate Executive, Senior Managing Corporate Executive and Group CFO, will give a presentation on the financial highlights for the fiscal year ended March 31, 2024, for about 15 minutes, and then we will move on to the Q&A session. The entire session is expected to take approximately 15 minutes. Before I begin, I would like to ask for your understanding. The presentation to follow may include forward-looking statements based on current expectations. However, all such statements are subject to risks and uncertainties. Please be aware that actual results may differ materially from those discussed in the forward-looking statements. Now we would like to begin. Mr. Togawa, please begin your presentation.

Investors, shareholders and representatives of rating agencies, it is pleasure to meet you. My name is Togawa, and I was appointed Group CFO this April. Thank you for joining this online conference at this late hour. Please refer to the presentation material titled financial highlights under Japanese GAAP for the fiscal year ended March 31, 2024. After explaining our financial results for FY '23, I will explain our performance targets and shareholder returns policy for FY '24 and outline our new medium-term business plan starting this fiscal year. I will start with the income statement summary. Please turn to Page 10. Line 1, gross profits on the left side of the table increased by ¥229.5 billion year-on-year. Line 2 and below is a breakdown of gross profits. In FY '23, there was a large decrease in net interest income and a large increase in net other operating profits. In addition to the absence of revenue resulting from the sale of MUB, in the treasury business of the global markets, there was a recording of a decrease of gains on investment trusts cancellation of ¥555.7 billion, included in the prior year for bear funds with hedge purposes and losses on the sale of foreign bonds in net other operating profits or losses and rebalancing of the bond portfolio, resulting in adjustment of accounting items. Excluding these two factors, net interest income also increased steadily on a real basis. Line 3, net fees and commissions increased approximately ¥130 billion, mainly due to an increase in fees related to foreign loans and an increase in fee income from the AM/IS business and Wealth Management business bringing steady top line growth. Line 6, G&A expenses were down ¥19.9 billion year-on-year, despite the effects of inflation and weaker yen, mainly due to a decrease in expenses resulting from the sale of MUB. Line 21, expense ratio improved significantly to 61%, down 3.5 percentage points from the same period last year, largely due to gross profit growth but also due to successful expense control. As a result, Line 7, net operating profit increased ¥249.4 billion to ¥1,843.7 billion, a record high, offsetting the impact of the sale of MUB. Total credit cost, Line 8, amounted to ¥497.9 billion, reflecting the absence of the reversal of reserves in the previous year and an increase in overseas allowances, including the impact of acquisitions and individual company factors. The absence of the ¥393.9 billion valuation losses on loan held by MUB in the previous year resulted in ¥176.9 billion decrease in expenses compared to the same period last year. Equity in earnings of equity method investees, Line 12, is due to the change of closing date in the equity method of accounting for Morgan Stanley. And in FY 2023, equity in earnings increased by ¥105.9 billion from the same period of the previous year as profits were recorded for 15 months instead of 12 months. The net effect of Morgan Stanley's profit increased due to the change of closing date when applying the equity method of accounting is just under ¥85 billion since the loss on change in equity was also recorded for two quarters in the net extraordinary gains and losses. As a result of the above, profits attributable to owners of parent, Line 17, increased by ¥374.2 billion year-on-year to ¥1,490.7 billion, the highest profit in MUFG history. ROE, Line 19, was 8.5% or 8.1% even excluding the profit increase effect of Morgan Stanley's change of closing date, which I explained earlier. Please go to Page 11. The graph on the lower left show a breakdown of year-on-year changes in net operating profits by business segment. In Customer segments, all business segments steadily increased net operating profit, mainly due to an increase in lending and deposit interest income and fee income. As a result, total net operating profit of Customer segments rose sharply by ¥470.3 billion. On the other hand, Global Markets posted a decrease in profit due to increase in foreign currency funding costs in treasury business and the significant impact of portfolio rebalancing. Page 12 on the right is a breakdown of changes in net income by business segment. While JCIB was down due to an increase in overseas credit costs and global markets due to the impact of portfolio rebalancing in treasury business, other business segments reported an increase in net income due to higher net operating profit. Page 14 is a balance sheet summary. Loans, second line in the table on the left, increased by approximately ¥8 trillion from the end of the previous fiscal year. Approximately 70% of this increase is attributable to the increase in overseas loans. Line 6, which is generally due to the impact of yen depreciation. Deposits from Line 12 and below increased approximately ¥10 trillion from the end of the previous fiscal year, of which overseas deposit increased ¥7.1 trillion, again, mainly due to the impact of foreign exchange. Next is Page 15, it shows the status of domestic loans. The graph on the lower right shows the domestic corporate lending spreads, the red line, the large cooperations continues to improve and the orange line for SMEs indicates a gradual improvement. The next page is Page 16, and it shows the status of the overseas loans. The graph on the lower right shows the overseas lending spreads. As for domestic, we have maintained an improving trend through our efforts to improve profitability. Please turn to Page 17, this is the status of loan assets. Nonperforming loans, the bar graph on the left, increased due in part to the factors related to individual overseas companies, resulting in a slight increase of NPL ratio, but remains at a low level. Please turn to Page 18 on the status of securities, including equities and government bonds. Unrealized gains and losses are shown in the upper left table, with the increase in unrealized gains on domestic equity securities, thanks to rising stock prices and improvement in unrealized gains and losses on foreign bonds following the sale of U.S. treasury bonds and U.S. mortgage bonds, unrealized gains for available-for-sale securities totaled ¥2.7 trillion. Line 8, unrealized losses on foreign bonds is approximately ¥1 trillion, but as shown below the upper right graph, unrealized losses in real terms, taking into account unrealized gains, reflecting hedging positions was approximately ¥0.5 trillion. So although overseas interest rates rose and remained high, we were able to firmly control and improve the unrealized gains and losses. The selling amount of equity holdings on the lower right shows that in FY '23, we sold ¥216 billion on an acquisition cost basis. As a result, we reached ¥539 billion, exceeding the 3-year cumulative sales target of ¥500 billion in the previous MTBP. In the new MTBP, the target is ¥350 billion, with the aim of reducing the ratio of market value, including deemed shareholdings to consolidated net assets to less than 20% by the end of the next MTBP period. Page 19 shows our capital adequacy. CET1 ratio on finalized and fully implemented Basel III basis, excluding net unrealized gains on available-for-sale securities is 10.1%, which is around the middle of the new MTBP target range. Next, let me explain our FY '24 financial targets and shareholder returns. Please go back to Page 9. First, on the left, our target profits attributable to owners of parent is ¥1.5 trillion for FY '24. In FY '24, we expect the yen to strengthen year-on-year and will offset the negative impact on our profit. In the absence of the FY '23 positive impact of the change in the equity method accounting date for Morgan Stanley, driven by an increase in NOP. Next, shareholder returns, on the right. In the new MTBP, dividend payout ratio will remain at around 40%, and the basic policy is to increase dividend per share steadily and sustainably through profit growth, taking into account the optimal balance between capital soundness and growth investment. On that basis, FY '24, dividend per common stock forecast is set at ¥50, an increase of ¥9 for two consecutive years. In addition, repurchase of our own shares up to ¥100 billion was resolved today. Regarding shareholder returns, the current basic policy was originally formulated during my three years as Head of the Financial Planning Division from 2016. So I hope you will understand that the basic policy remains unchanged. Finally, on the new MTBP, please go back to Page 5. Under the previous MTBP, which was positioned as three years of challenge and transformation, we focused on improving profitability and creating resilient business model. We sold MUB while making an approximately ¥700 billion strategic investment for future growth. The new MTBP is positioned as three years to pursue and produce growth, taking the opportunity offered by the recent major changes in the social and economic structure and environment. The three pillars supporting this concept are: Expand and refine growth strategies; drive social and environmental progress; and accelerating transformation and innovation with a financial target of around 9% ROE in the final year. From Page 6, let me explain the three pillars of the new MTBP. In the first pillar, expand and refine growth strategies, MUFG's strategy in the new MTBP was examined on Products x Channels quadrants and seven growth strategies to capture growth were formulated. We aim to achieve growth through a more resilient business model, which includes improving the profitability of our balance sheet based on changes in the interest rate environment as well as broader customer touch point through new products and services and new channels. Focusing on these strategies, we set a target of increasing NOP by approximately ¥500 billion over three years, targeting over ¥2.1 trillion for FY '26, an increase of 30% compared to FY '23. Please turn to Page 7. Left side is an overview of the second pillar, drive social and environmental progress. We have been working to contribute to the resolution of social issues over the years. But in the new MTBP, we are taking it to the next level and focusing on the implementation of initiatives and materialization of results with a greater awareness of the societal impact. We selected 10 priority issues based on the three axes of sustainable society, vibrant society and resilient society and set specific targets as KPIs, which we will promote in tandem with our growth strategy. Right side shows the third pillar, accelerating transformation and innovation. In the previous MTBP, we fostered the mindset of taking on new challenges among our employees through the initiatives listed here. In the new MTBP, we will keep the existing initiatives while further strengthening our corporate culture, human resources, systems, AI and other management foundations, which form the basis for growth in line with our basic policy of three years to pursue and produce growth. Please turn to Page 8. Let me explain the financial targets of the new MTBP based on these strategies. In the new MTBP, we will continue our ROE-focused management, aiming for ROE target of around 9%. In addition, to improve the transparency of our capital management, our CET1 ratio target range is now 9.5% to 10.5%. The three drivers for achieving the ROE target in the previous MTBP, profits, expenses and risk-weighted assets, remain unchanged in the new MTBP. In profits, the first driver, we aim to achieve NOP of over ¥2.1 trillion and net profits of over ¥1.6 trillion in FY '26. In expenses, the second driver, we will maintain disciplined management and prioritize our operations to aim for expense ratio of around 60% in FY '26. In RWA, the third driver, we are replacing low profitability RWA with high profitability RWA. By operating our business with these three drivers in mind, we will achieve ROE of around 9% in the new MTBP and take steady steps toward our mid- to long-term target of 9% to 10% ROE. That concludes my explanation. A - Unidentified Company Representative: Thank you very much, Mr. Togawa. We will now take questions. [Operator Instructions] Now we'd like to take the first question. Mr. Takamiya, please.

Thank you very much. This is Takamiya from Nomura Securities. I have two questions. My first question is on the profits attributable to owners of parent. What were your thoughts or emotions behind the target of ¥1.5 trillion. Where my question is coming from is, this ¥1.5 trillion is an ambitious target, slightly higher than the current market consensus. Banks usually come up with a conservative target at the beginning of the fiscal year. And the results of the fiscal year just ended was aided by a tailwind. And yet you are still looking for an upside in FY '24. Please share the intention behind this ambitious target. And my second question is on ¥100 billion share repurchase that was just announced. It gives a setback of your shareholder returns policy. Just looking at the numbers or the total payout ratio, it is a decline from the previous fiscal year. However, looking at the target CET1 ratio, excluding the unrealized gain, it is right at the middle of the range. So as capital is accumulated with profit growth going forward, it may lead to better visibility of achieving the targets. And if so, will there be a possibility that an additional shareholder returns be considered? I'm not asking you to state whether you'll be conducting additional returns going forward here today, but with this ¥100 billion may be considered as a setback from the shareholders' returns policy of management with focus on ROE.

Thank you very much for your questions. First, on the assumptions of the FY 2024 plan. As for the exchange rates, the plan is based on the assumption of ¥140 to the U.S. dollar. And as for the domestic policy interest rate, we assume that 0.1% will be maintained throughout this fiscal year. With these assumptions, we have set the target of ¥1.5 trillion. The change in closing date of Morgan Stanley will come to an impact of ¥84 billion to the final profit, but with this being absent, it will bring a negative impact. The impact of foreign exchange will result in negative ¥56 billion from the previous fiscal year and the ¥84 billion related to Morgan Stanley, I mentioned earlier, will be offset by increase in NOP. There will also be impact of change of closing date for Krungsri as well, lifting the numbers. But basically, those will be offset with NOP, and that is a plan we have formulated. Actually, we had heated discussion whether to go with ¥1.5 trillion or not. But under Group CEO, Kamezawa's leadership, the decision was made to go with ¥1.5 trillion as a target. It will be dependent on the timing of the change in the policy interest rate. But when the interest rate is raised, there will be a plus alpha effect to be considered. And although it will be limited to a small amount in FY '24, this is considered. As for the meaning behind ¥100 billion of share repurchase, our aim is to somehow reach payout ratio of 40%. And with two consecutive years of raising the dividend up by ¥9, excluding the currency profit impact of ¥20 billion in FY 2024, we have almost just reached this 40%. As for the FY 2023 share buyback, ¥400 billion is mainly coming from capital adjustment from the release of capital related to the sale of MUB. Therefore, if we are to conduct returns at the beginning of the fiscal year, it will be set at ¥100 billion. And if we see steady progress going forward or if the yen interest rate changes, bringing us confidence that we will be able to achieve the target, then we will consider whether to conduct additional share buyback in conjunction with investment into growth after the midterm. By the way, thank you for recognizing this as an ambitious target. I hope that answers your question.

Yes, thank you very much for the explanation.

Thank you very much. Next, Mr. Nakamura, please.

Yes, this is Nakamura from BofA Securities. Thank you for the presentation. I have two questions. First, on CET1 ratio. There is an approximately 50 basis point decline quarter-on-quarter compared to 10.6% in the third quarter. What were the factors behind this decline of 50 basis points as it was quite a sharp decline? The range has widened to between 9.5% to 10.5%. But is there any intention behind this that you want to maintain it around 10%? I would like to have your confirmation. Second question is on reduction of equity holdings. I do understand well that your group has been working on it proactively, but the target will decline from ¥500 billion to ¥350 billion. What is the background factor or logic behind this deceleration when we are seeing acceleration in general? Is there any upside factors with effort you'll be able to achieve this? Please share.

Thank you very much for your question. First, on the CET1 ratio compared to the third quarter, there are two main factors. First, the accumulation of profit in the fourth quarter. We worked on improving the book value. And as you can tell by looking at the P&L, ¥230 billion of credit cost is recorded in the fourth quarter. So retained earnings or capital accumulation was quite small. And the second factor is purely technical in nature. The foreign currency translation reserve related to change in closing dates, we adopt the currency rate at the end of December and for others, the rate at the end of March, resulting in gain that was more than expected by the Street. We had expected right around this amount at the end of the fiscal year. And as for the target range, I understand that there was quite a debate over last year. So in order to increase transparency, we set the target between 9.5% to 10.5%, but our current thinking is to set the middle line at 10% with 20 to 30 basis points leeway on either side. And as for your question on equity holdings, it is very MUFG in that. With new MTBP, it is formulated bottom up. And as we see advances in the sales negotiation, it is the fact that we are left with the bedrock brands. And if we accumulate them, what we can commit to is ¥350 billion. However, having said that, looking at the moves of casualty insurance industry or the activists with operating companies, we can expect a further headway. But as for the start of the new MTBP, we will commit to ¥350 billion as outlined in the plan. And as stated in the financial results highlights, during the next MTBP, the market value of equity holdings and deemed shares held will be kept within 20% of net assets, and that will be our target. And with the pace that we are achieving, we will be able to keep to the target in the next MTBP period. This is the thinking behind the plan of ¥350 billion.

So going back to the first question. Listening to what you have just said, even so the decline was quite sizable, and, I believe, you said there were three factors involved. The foreign currency translation reserve recognition and no accumulation of profit, which we had not expected to start with, is there any other factors involved, any deduction items involved?

Well, profit of just less than ¥0.2 trillion accumulated in the fourth quarter, a dividend of minus ¥0.2 trillion and share buyback of minus ¥0.2 billion, with retained earnings in the negative and goodwill of AlbaCore and Mandala, minus ¥0.14 trillion. And CapEx of Morgan Stanley related to foreign exchange and MS internal reserves and smaller than market expectation of the foreign currency translation reserves, those led to decrease in the denominator. And maybe it was smaller than what had expected by the Street. I believe those are the factors involved.

Understood. So MS and double gearing are included. Now I understand. Thank you very much.

Thank you very much. So we will take the next questioner, Matsuno-san, please.

This is Matsuno from Mizuho Securities. I have two questions. First is on capital policy. Am I correct in understanding that the shareholder return policy in the new MTBP remains unchanged from the previous MTBP?

You are right, there is no change. Previously, we said we aim for a dividend payout ratio of 40%. And this time, we are saying maintain approximately 40%. In that sense, we will continue with it, and that is the only change.

Understood. My next question is on the exchange rate sensitivity on CET1 ratio. Please also explain whether this will result in a decrease in foreign currency translation reserve and the amount of share buybacks since the yen was considerably strong in your FX assumption in the final year of the previous MTBP.

Yes, ¥1 depreciation increases or appreciation decreases the CET1 ratio by approximately two basis points. So ¥1 appreciation is two basis points.

Understood. As the exchange rate assumption for the final year of the new MTBP is set between ¥125 and ¥130, will the decrease in numerator foreign currency translation reserve due to strong yen pushed down CET1 ratio?

That is the case in the plan up to FY '26.

Understood. So you are saying that if the yen weakens, capital surplus will increase?

Yes. But our shareholder return policy will not change during the MTBP period as a result of foreign exchange impact. Under the current FX assumptions, we will continue to return profits to shareholders based on the same disciplined capital management as in the past.

I understand. My next question is on the breakdown of NOP in the new MTBP, which is mentioned on Page 6, to reach ¥2.1 trillion, up by ¥500 billion. Could you give us a bit more color on how this is divided between the top line and expenses?

If we go by the planned rate mentioned earlier, the net increase of ¥500 billion in NOP is based on the assumption that gross profit increase by ¥1 trillion and expenses increase by ¥500 billion.

Thank you very much.

Does this answer your question?

Yes.

Thank you. Next questioner. Mr. Yano, please go ahead.

Thank you. This is Yano from JPMorgan Securities. I have two questions. The first is on CET1 ratio, and I'm sorry to be persistent, but I want to ask you in more detail about the technical factors you mentioned in your response to Mr. Nakamura earlier. Am I correct in understanding that the technical impact of the temporary decrease is not necessarily large, but that it is a structural decrease to 10.1%? Also, I am sorry to quote the media coverage, but there is a potential strategic investment in India. And if we assume that the yen will strengthen in the future, you said that CET1 ratio will be around 10%. But I think it will fall below 10%. Has your internal view on capital buffer changed over time? Is CET1 ratio down to 10.1% from structural reasons? And after a while, it will go back up again in the next quarter or not? This is my first question. My second question is simple. You explained on Page 17 that credit costs are rising, but not that high, but it is indeed rising. I would appreciate it if you could comment on the credit situation by category, for example, domestic, corporate, retail, et cetera.

Regarding CET1 ratio and the technical factor, we intend to operate under the assumption that the CET1 ratio could go below 10% due to the impact of the recognition delay in the foreign currency translation reserve, as mentioned earlier. Does this answer your question?

Understood. In terms of the recognition delay in foreign currency translation reserve, how big will it be in terms of basis points?

It depends on your assumption, but assuming that there were no such impacts, the difference in the foreign currency translation reserve would be around ¥0.2 trillion. So the gap from your assumption could have been around 20 basis points.

I understand. Thank you.

To your second question, credit costs have risen in the Americas, as you can see, increasing by about ¥200 billion, but it is due to some individual companies. We do not expect it to increase at the same pace going forward. As for potential areas, we expect an annual increase of around ¥20 billion to ¥30 billion due to the business expansion of two consumer finance companies in Japan and the retail business in Asia. This will be accompanied by a strong top line growth. So this is our assumption for credit costs. We are assuming credit costs of ¥400 billion for FY '24, including approximately ¥50 billion due to change in financial results closing date for Krungsri.

Thank you very much.

Thank you very much. We have a questioner. Ms. Kuroda, please.

Thank you very much. I have one question. Is the NOP target of over ¥2.1 trillion for FY '26 achievable through organic growth?

Thank you very much. If you could look at the bar chart showing ¥340 billion growth in NOP, you can see that the growth is particularly strong in -- for strengthened APAC business and platform resilience. This is inorganic as it includes the impact of the deals that are already announced and will be completed in the future.

But they are already in the group at the moment, right?

Yes, you're right. MUFG Group will increase NOP in an integrated manner.

Thank you very much.

The next questioner, Mr. Matsuda. Please go ahead.

Thank you very much. This is Matsuda from Daiwa Securities. I have two questions. First, regarding the results for FY '23, you finished the year far exceeding the plan, but I think you could have achieved 7.5% ROE with lower profits. While profits were generated, unrealized losses on foreign bonds still seems to exist. Was there a little incentive to cut losses? That is my first question. My second question is on the assumptions for the new MTBP. I think profits of over ¥1.6 trillion is calculated by backcasting from 9% ROE. Do you have any assumptions or targets for the total payout ratio?

Thank you very much. As to whether we could have cut losses a little more in FY '23, we have to admit that there was an upside to our estimates. And we faced some uncontrollable factors when we changed the financial results closing date. And large credit costs were recorded in Q4. Therefore, this level of portfolio rebalance was considered appropriate in FY '23. Regarding the total payout ratio in the new MTBP, the NOP plan was developed through a bottom-up process. MTBP plans for capital management with 9% ROE target, but we have not set the target for a total payout ratio. The policy is to maintain a dividend payout ratio of around 40% and total return and share buybacks will be considered from the perspective of growth investment and capital soundness to achieve 9% ROE. Thank you very much for your wide-ranging questions and valuable comments today. I only explained FY '23 results and the outline of the new MTBP today, and Kamezawa will explain the details of the new MTBP, including his thoughts at the briefing on the 17th. I look forward to your participation. Like my predecessor, Yonehana, I will continue to focus on our dialogue with shareholders and investors while working on financial and capital management to continue increasing shareholder value. I'd like to ask you for your continued understanding and further support. Thank you very much for joining us today.