July 31, 2019 / 7:37 AM / 3 months ago

UPDATE 1-Japan's largest lender MUFG posts 24% rise in Q1 net profit

* Q1 net profit 391 bln yen vs 315 bln yen year earlier

* Avoided write-down on Indonesian Bank Danamon (Adds further earnings details, context)

By Takashi Umekawa

TOKYO, July 31 (Reuters) - Mitsubishi UFJ Financial Group Inc (MUFG) on Wednesday said its net profit rose 24.1% in the first quarter ended June, primarily helped by gains from the sale of foreign bonds.

Japan’s largest lender by assets reported profit of 391 billion yen ($3.60 billion) for the three-month period, versus 315 billion yen a year earlier.

For the full year ending March, the bank retained its profit forecast of 900 billion yen, down 3% on year. That compared with the 920.8 billion yen average of 11 analyst estimates compiled by Refinitiv.

Its core banking operations continued to be weak in the first quarter, dragged down by weak yen-bond trading and an ultra-low interest rate environment under the central bank’s aggressive monetary easing.

MUFG said, however, it earned 85.2 billion yen by selling foreign bonds which the bank had bought before interest rates started to decline.

Its bottom line was also buoyed by a 23.9 billion yen gain from selling stocks of corporate clients.

Traditional Japanese business practice saw banks acquire small stakes in corporate clients. But MUFG and its rivals have been trying to cut these holdings as the practice has come under criticism for amplifying banks’ risk exposure to market swings and hindering greater corporate governance at issuer companies.

MUFG earlier in the quarter faced the possibility of booking a write-down in PT Bank Danamon Indonesia Tbk, of which it owns 94%, as the Indonesian lender’s share price sank. A slight price recovery at the end of the quarter, however, spared MUFG the charge. ($1 = 108.5300 yen) (Reporting by Takashi Umekawa; Editing by Christopher Cushing)

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