Some things should just not be attempted on Mondays, and deciphering Mitsubishi UFJ Financial's (NYSE:MTU) earnings is one of those things. The situation is certainly better for this huge Japanese bank (formed in the merger of Mitsubishi Tokyo Financial and UFJ Holdings in late '05), and a prolonged recovery in the Japanese economy would certainly be good news for them.
Not only is it challenging enough to analyze big banks (with all their various one-off items and units), but the complications from the merger add another layer of complexity. Here's what I will say -- business was better this past year. Loans were up slightly (about 2%), deposits were also up (about 0.6%), net interest income rose 2.5%, and the company reversed a year-ago loss.
Although I wasn't a huge fan of this stock this morning, it does look little more interesting in light of the pounding it's taking today. Like many other Japanese banks, this company made some glaring tactical errors and paid a heavy price for them. Now, though, the balance sheets are cleaner, non-performing loans are getting better, and the Japanese economy is perking up.
Set against that, though, is the privatization of the Japanese postal system. For reasons that (I confess) I don't fully understand, the Japanese postal savings system has been tremendously successful -- to the tune of holding roughly one-quarter of all of Japan's household assets and about one-fifth of the government's debt. And given that the privatization effort is bound to take a few twists and turns, I don't see how the fate of such a huge pile of assets won't have a definite bearing on the operations of big banks like Mitsubishi UFJ.
Investors have certainly warmed up to the stock and given it a lot of credit for both its recovery and that of Japan broadly. By the same tune, ongoing improvements in operations and the Japanese economy would certainly leave more room for better performance (and dividends). That said, there are ample ways to play a broader theme of a stronger Japan -- stocks like Toyota (NYSE:TM), Nissan (NASDAQ:NSANY), Sony (NYSE:SNE), and Canon (NYSE:CAJ) come to mind, as do exchange-traded funds and mutual funds focused on that country.
For more Foolish thoughts on foreign banks:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
