annual reports 2015-07-27 00:00:00 Annual Report 2015 MUFG Jul 27 2015

445 Pages·2015·1.81 MB·English

AsfiledwiththeSecuritiesandExchangeCommissiononJuly27,2015
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,D.C.20549
FORM 20-F
‘REGISTRATIONSTATEMENTPURSUANTTOSECTION12(b)OR(g)OF
THESECURITIESEXCHANGEACTOF1934
OR
ÈANNUALREPORTPURSUANTTOSECTION13OR15(d)OF
THESECURITIESEXCHANGEACTOF1934
ForthefiscalyearendedMarch31,2015
OR
‘TRANSITIONREPORTPURSUANTTOSECTION13OR15(d)OF
THESECURITIESEXCHANGEACTOF1934
Forthetransitionperiod to
OR
‘SHELLCOMPANYREPORTPURSUANTTOSECTION13OR15(d)OF
THESECURITIESEXCHANGEACTOF1934
Dateofeventrequiringthisshellcompanyreport
Commissionfilenumber000-54189
KABUSHIKI KAISHA MITSUBISHI UFJ FINANCIAL GROUP
(ExactnameofRegistrantasspecifiedinitscharter)
MITSUBISHI UFJ FINANCIAL GROUP, INC.
(TranslationofRegistrant’snameintoEnglish)
Japan
(Jurisdictionofincorporationororganization)
7-1,Marunouchi2-chome
Chiyoda-ku,Tokyo100-8330
Japan
(Addressofprincipalexecutiveoffices)
KazutakaYoneda,[phone],[phone],sameaddressasabove
(Name,Telephone,FacsimilenumberandAddressofCompanyContactPerson)
SecuritiesregisteredortoberegisteredpursuanttoSection12(b)oftheAct:
Titleofeachclass Nameofeachexchangeonwhichregistered
Commonstock,withoutparvalue................................................................. NewYorkStockExchange(1)
Americandepositaryshares,eachofwhichrepresentsoneshareofcommonstock .......................... NewYorkStockExchange
(1) Thelistingoftheregistrant’scommonstockontheNewYorkStockExchangeisfortechnicalpurposesonlyandwithouttradingprivileges.
SecuritiesregisteredortoberegisteredpursuanttoSection12(g)oftheAct:
RestrictedShareUnitsgrantingrightstoundertheUnionBanCalCorporationStockBonusPlan
SecuritiesforwhichthereisareportingobligationpursuanttoSection15(d)oftheAct:
$2,300,000,000Fixed/FloatingRateNon-CumulativePreferredSecuritiesofMUFGCapitalFinance1Limited,andMitsubishiUFJFinancialGroup,Inc.’s
Guaranteethereof
€750,000,000Fixed/FloatingRateNon-CumulativePreferredSecuritiesofMUFGCapitalFinance2Limited,andMitsubishiUFJFinancialGroup,Inc.’s
Guaranteethereof
RestrictedShareUnitsgrantingrightstocommonstockpursuanttotheMUFGAmericasHoldingsCorporationStockBonusPlan
Indicatethenumberofoutstandingsharesofeachoftheissuer’sclassesofcapitalorcommonstockasofthecloseoftheperiodcoveredbytheannualreport:
AsofMarch31,2015,14,168,853,820sharesofcommonstock(including151,647,230sharesofcommonstockheldbytheregistrantanditsconsolidated
subsidiariesastreasurystock)
Indicatebycheckmarkiftheregistrantisawell-knownseasonedissuer,asdefinedinRule405oftheSecuritiesAct.
Yes È No ‘
Ifthisreportisanannualortransitionreport,indicatebycheckmarkiftheregistrantisnotrequiredtofilereportspursuanttoSection13or15(d)ofthe
SecuritiesExchangeActof1934.
Yes ‘ No È
Note—CheckingtheboxabovewillnotrelieveanyregistrantrequiredtofilereportspursuanttoSection13or15(d)oftheSecuritiesExchangeActof1934
fromtheirobligationsunderthoseSections.
Indicatebycheckmarkwhethertheregistrant(1)hasfiledallreportsrequiredtobefiledbySection13or15(d)oftheSecuritiesExchangeActof1934during
thepreceding12months(orforsuchshorterperiodthattheregistrantwasrequiredtofilesuchreports),and(2)hasbeensubjecttosuchfilingrequirementsforthe
past90days.
Yes È No ‘
IndicatebycheckmarkwhethertheregistranthassubmittedelectronicallyandpostedonitscorporateWebsite,ifany,everyInteractiveDataFilerequiredto
besubmittedandpostedpursuanttoRule405ofRegulationS-T(§232.405ofthischapter)duringthepreceding12months(orforsuchshorterperiodthatthe
registrantwasrequiredtosubmitandpostsuchfiles).
Yes È No ‘
Indicatebycheckmarkwhethertheregistrantisalargeacceleratedfiler,anacceleratedfiler,oranon-acceleratedfiler.Seedefinitionof“acceleratedfilerand
largeacceleratedfiler”inRule12b-2oftheExchangeAct.(Checkone):
Largeacceleratedfiler È Acceleratedfiler ‘ Non-acceleratedfiler ‘
Indicatebycheckmarkwhichbasisofaccountingtheregistranthasusedtopreparethefinancialstatementsincludedinthisfiling:
U.S.GAAP È InternationalFinancialReportingStandardsasissued Other ‘
bytheInternationalAccountingStandardsBoard ‘
If“Other”hasbeencheckedinresponsetothepreviousquestion,indicatebycheckmarkwhichfinancialstatementitemtheregistranthaselectedtofollow.
Item 17 ‘ Item18 ‘
Ifthisisanannualreport,indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).
Yes ‘ No È
TABLEOFCONTENTS
Page
Forward-LookingStatements .............................................................. 3
Item1. IdentityofDirectors,SeniorManagementandAdvisers ............................... 4
Item2. OfferStatisticsandExpectedTimetable ........................................... 4
Item3. KeyInformation .............................................................. 4
Item4. InformationontheCompany .................................................... 26
Item4A. UnresolvedStaffComments .................................................... 61
Item5. OperatingandFinancialReviewandProspects ...................................... 62
Item6. Directors,SeniorManagementandEmployees ...................................... 143
Item7. MajorShareholdersandRelatedPartyTransactions .................................. 164
Item8. FinancialInformation .......................................................... 165
Item9. TheOfferandListing .......................................................... 167
Item10. AdditionalInformation ......................................................... 168
Item11. QuantitativeandQualitativeDisclosuresaboutCredit,MarketandOtherRisk ............. 190
Item12. DescriptionofSecuritiesOtherthanEquitySecurities ................................ 215
Item13. Defaults,DividendArrearagesandDelinquencies ................................... 217
Item14. MaterialModificationstotheRightsofSecurityHoldersandUseofProceeds ............. 217
Item15. ControlsandProcedures ........................................................ 217
Item16A. AuditCommitteeFinancialExpert................................................ 221
Item16B. CodeofEthics ............................................................... 221
Item16C. PrincipalAccountantFeesandServices ........................................... 221
Item16D. ExemptionsfromtheListingStandardsforAuditCommittees .......................... 222
Item16E. PurchasesofEquitySecuritiesbytheIssuerandAffiliatedPurchasers ................... 223
Item16F. ChangeinRegistrant’sCertifyingAccountant ...................................... 223
Item16G. CorporateGovernance ......................................................... 223
Item16H. MineSafetyDisclosure ........................................................ 225
Item17. FinancialStatements........................................................... 226
Item18. FinancialStatements........................................................... 226
Item19. Exhibits ..................................................................... 226
SelectedStatisticalData .................................................................. A-1
ConsolidatedFinancialStatements .......................................................... F-1
ForpurposesofthisAnnualReport,wehavepresentedourconsolidatedfinancialstatementsinaccordance
withaccountingprinciplesgenerallyacceptedintheUnitedStates,orU.S.GAAP,exceptforrisk-adjusted
capitalratios,businesssegmentfinancialinformationandsomeotherspecificallyidentifiedinformation.Unless
otherwisestatedorthecontextotherwiserequires,allamountsinourfinancialstatementsareexpressedin
Japaneseyen.
WhenwereferinthisAnnualReportto“MUFG,”“we,”“us,”“our”andthe“Group,”wegenerallymean
MitsubishiUFJFinancialGroup,Inc.anditsconsolidatedsubsidiaries,butfromtimetotimeasthecontext
requires,wemeanMitsubishiUFJFinancialGroup,Inc.asanindividuallegalentity.Similarly,referencesto
“MTFG”and“UFJHoldings”aretoMitsubishiTokyoFinancialGroup,Inc.andtoUFJHoldings,Inc.,assingle
entities,respectively,aswellastoMTFGandUFJHoldingsandtheirrespectiveconsolidatedsubsidiaries,asthe
contextrequires.Inaddition,our“commercialbankingsubsidiaries”referstoTheBankofTokyo-Mitsubishi
UFJ,Ltd.,or“BTMU,”and,asthecontextrequires,itsconsolidatedsubsidiariesengagedinthecommercial
bankingbusiness.Our“trustbankingsubsidiaries”referstoMitsubishiUFJTrustandBankingCorporation,or
“MUTB,”and,asthecontextrequires,itsconsolidatedsubsidiariesengagedinthetrustbankingbusiness.Our
“bankingsubsidiaries”referstoBTMUandMUTBand,asthecontextrequires,theirrespectiveconsolidated
subsidiariesengagedinthebankingbusiness.Our“securitiessubsidiaries”referstoMitsubishiUFJSecurities
HoldingsCo.,Ltd.,or“MUSHD,”andasthecontextrequires,itsconsolidatedsubsidiariesengagedinthe
securitiesbusiness.
Referencesto“MUAH”and“MUB”aretoMUFGAmericasHoldingsCorporationandMUFGUnion
Bank,N.A.,assingleentities,respectively,aswellastoMUAHandMUBandtheirrespectiveconsolidated
1
subsidiaries,asthecontextrequires.EffectiveJuly1,2014,weintegratedBTMU’soperationsintheAmericas
regionwiththeoperationsofUnionBanCalCorporation,or“UNBC,”whichisawhollyownedsubsidiaryof
BTMU,andchangedUNBC’scorporatenameto“MUFGAmericasHoldingsCorporation.”UnionBank,N.A.,
whichisMUAH’sprincipalsubsidiary,wasalsorenamed“MUFGUnionBank,N.A.,”effectivethesameday.
Referencesto“KS”or“Krungsri”aretoBankofAyudhyaPublicCompanyLimited,asasingleentity,as
wellastoKSanditsrespectiveconsolidatedsubsidiaries,asthecontextrequires.EffectiveJanuary5,2015,we
integratedtheoperationsoftheBTMUBangkokbranchwiththeoperationsofKStocomplywiththeThai
regulatoryrequirementgenerallyreferredtoasthe“onepresence”policy,whichlimitsfinancialconglomerates
toasinglelicenseddeposittakingentityinThailand.
ReferencesinthisAnnualReportto“yen”or“¥”aretoJapaneseyen,referencesto“U.S.dollars,”
“U.S.dollar,”“dollars,”“U.S.$”or“$”aretoUnitedStatesdollars,andreferencesto“euro”or“€”aretothe
currencyofthememberstatesoftheEuropeanMonetaryUnion.
OurfiscalyearendsonMarch31ofeachyear.Referencestoyearsnotspecifiedasbeingfiscalyearsareto
calendaryears.
WeusuallyholdtheordinarygeneralmeetingofshareholdersofMitsubishiUFJFinancialGroup,Inc.in
JuneofeachyearinTokyo.
2
Forward-LookingStatements
Wemayfromtimetotimemakewrittenororalforward-lookingstatements.Writtenforward-looking
statementsmayappearindocumentsfiledwithorsubmittedtotheU.S.SecuritiesandExchangeCommission,or
SEC,includingthisAnnualReport,andotherreportstoshareholdersandothercommunications.
TheU.S.PrivateSecuritiesLitigationReformActof1995providesa“safeharbor”forforward-looking
informationtoencouragecompaniestoprovideprospectiveinformationaboutthemselves.Werelyonthissafe
harborinmakingtheseforward-lookingstatements.
Forward-lookingstatementsappearinanumberofplacesinthisAnnualReportandincludestatements
regardingourcurrentintent,businessplan,targets,belieforexpectationsorthecurrentbelieforcurrent
expectationsofourmanagementwithrespecttoourresultsofoperationsandfinancialcondition,including,
amongothermatters,ourproblemloansandloanlosses.Inmany,butnotallcases,weusewordssuchas
“anticipate,”“aim,”“believe,”“estimate,”“expect,”“intend,”“plan,”“probability,”“risk,”“will,”“may”and
similarexpressions,astheyrelatetousorourmanagement,toidentifyforward-lookingstatements.These
statementsreflectourcurrentviewswithrespecttofutureeventsandaresubjecttorisks,uncertaintiesand
assumptions.Shouldoneormoreoftheserisksoruncertaintiesmaterializeorshouldunderlyingassumptions
proveincorrect,actualresultsmayvarymateriallyfromthosewhichareaimed,anticipated,believed,estimated,
expected,intendedorplanned,orotherwisestated.
Ourforward-lookingstatementsarenotguaranteesoffutureperformanceandinvolverisksand
uncertainties.Actualresultsmaydifferfromthoseintheforward-lookingstatementsasaresultofvarious
factors.WeidentifyinthisAnnualReportin“Item3.D.KeyInformation—RiskFactors,”“Item4.B.Information
ontheCompany—BusinessOverview,”“Item5.OperatingandFinancialReviewandProspects”andelsewhere,
some,butnotnecessarilyall,oftheimportantfactorsthatcouldcausethesedifferences.
Weareundernoobligation,anddisclaimanyobligation,toupdateoralterourforward-lookingstatements,
whetherasaresultofnewinformation,futureeventsorotherwise.
3
PARTI
Item1. IdentityofDirectors,SeniorManagementandAdvisers.
Notapplicable.
Item2. OfferStatisticsandExpectedTimetable.
Notapplicable.
Item3. KeyInformation.
A. SelectedFinancialData
Theselectedstatementofincomedataandselectedbalancesheetdatasetforthbelowhasbeenderivedfrom
ourauditedconsolidatedfinancialstatements.
Exceptforrisk-adjustedcapitalratios,whicharecalculatedinaccordancewithJapanesebankingregulations
basedoninformationderivedfromourconsolidatedfinancialstatementspreparedinaccordancewithaccounting
principlesgenerallyacceptedinJapan,orJapaneseGAAP,theselectedfinancialdatasetforthbelowarederived
fromourconsolidatedfinancialstatementspreparedinaccordancewithU.S.GAAP.
Youshouldreadtheselectedfinancialdatasetforthbelowinconjunctionwith“Item5.Operatingand
FinancialReviewandProspects,”“SelectedStatisticalData”andourconsolidatedfinancialstatementsandother
financialdataincludedelsewhereinthisAnnualReport.Thesedataarequalifiedintheirentiretybyreferenceto
allofthatinformation.
4
FiscalyearsendedMarch31,
2011 2012 2013 2014 2015
(inmillions,exceptpersharedataandnumberofshares)
Statementofincomedata:
Interestincome(1) ................................. ¥ 2,550,144 ¥ 2,595,956 ¥ 2,427,521 ¥ 2,522,283 ¥ 2,894,645
Interestexpense .................................. 670,673 640,139 556,418 560,972 663,184
Netinterestincome ............................... 1,879,471 1,955,817 1,871,103 1,961,311 2,231,461
Provision(credit)forcreditlosses .................... 292,035 223,809 144,542 (106,371) 86,998
Netinterestincomeafterprovision(credit)forcredit
losses ........................................ 1,587,436 1,732,008 1,726,561 2,067,682 2,144,463
Non-interestincome............................... 1,694,822 1,440,576 2,067,909 1,821,081 2,845,078
Non-interestexpense .............................. 2,460,446 2,322,642 2,378,599 2,468,320 2,726,885
Incomebeforeincometaxexpense ................... 821,812 849,942 1,415,871 1,420,443 2,262,656
Incometaxexpense ............................... 433,625 429,191 296,020 337,917 666,020
Netincomebeforeattributionofnoncontrolling
interests ...................................... 388,187 420,751 1,119,851 1,082,526 1,596,636
Netincome(loss)attributabletononcontrolling
interests ...................................... (64,458) 4,520 50,727 67,133 65,509
NetincomeattributabletoMitsubishiUFJFinancial
Group ........................................ ¥ 452,645 ¥ 416,231 ¥ 1,069,124 ¥ 1,015,393 ¥ 1,531,127
EarningsapplicabletocommonshareholdersofMitsubishi
UFJFinancialGroup ............................ ¥ 431,705 ¥ 398,291 ¥ 1,051,184 ¥ 994,152 ¥ 1,522,157
Amountspershare:
Basicearningspercommonshare—Earningsapplicableto
commonshareholdersofMitsubishiUFJFinancial
Group ........................................ ¥ 30.55 ¥ 28.17 ¥ 74.30 ¥ 70.21 ¥ 107.81
Dilutedearningspercommonshare—Earningsapplicable
tocommonshareholdersofMitsubishiUFJFinancial
Group ........................................ 30.43 28.09 74.16 69.98 107.50
Numberofsharesusedtocalculatebasicearningsper
commonshare(inthousands) ..................... 14,131,567 14,140,136 14,148,060 14,158,698 14,118,469
Numberofsharesusedtocalculatedilutedearningsper
commonshare(inthousands)(2) .................... 14,144,737 14,156,820 14,169,080 14,180,080 14,137,645
Cashdividendspersharepaidduringthefiscalyear:
—Commonstock ................................. ¥ 12.00 ¥ 12.00 ¥ 12.00 ¥ 14.00 ¥ 18.00
$ 0.14 $ 0.15 $ 0.15 $ 0.14 $ 0.16
—Preferredstock(Class3) ......................... ¥ 30.00 — — — —
$ 0.34 — — — —
—Preferredstock(Class5)(3)........................ ¥ 115.00 ¥ 115.00 ¥ 115.00 ¥ 115.00 ¥ 57.50
$ 1.33 $ 1.45 $ 1.42 $ 1.14 $ 0.57
—Preferredstock(Class11)(4)....................... ¥ 5.30 ¥ 5.30 ¥ 5.30 ¥ 5.30 ¥ 2.65
$ 0.06 $ 0.07 $ 0.07 $ 0.05 $ 0.03
AsofMarch31,
2011 2012 2013 2014 2015
(inmillions)
Balancesheetdata:
Totalassets................................. ¥202,850,243 ¥215,202,514 ¥230,559,276 ¥253,661,077 ¥280,886,326
Loans,netofallowanceforcreditlosses .......... 86,261,519 91,012,736 97,254,242 109,181,991 117,209,723
Totalliabilities .............................. 194,187,331 206,344,067 219,617,296 240,909,633 265,604,985
Deposits ................................... 136,631,704 139,493,730 148,209,739 162,517,786 171,991,267
Long-termdebt.............................. 13,356,728 12,593,062 12,182,358 14,498,678 19,968,735
Totalequity ................................ 8,662,912 8,858,447 10,941,980 12,751,444 15,281,341
Capitalstock................................ 2,086,232 2,087,244 2,088,135 2,089,245 2,090,270
5
FiscalyearsendedMarch31,
2011 2012 2013 2014 2015
(inmillions,exceptpercentages)
Otherfinancialdata:
Averagebalances:
Interest-earningassets ........................ ¥180,260,385 ¥184,179,147 ¥193,824,256 ¥212,176,348 ¥237,247,664
Interest-bearingliabilities ..................... 161,344,664 165,420,569 173,399,441 189,413,309 210,101,348
Totalassets................................. 204,781,984 211,835,389 225,682,785 247,729,744 277,557,493
Totalequity ................................ 8,987,129 8,594,310 9,244,530 10,683,098 13,002,955
Returnonequityandassets:
Earningsapplicabletocommonshareholdersasa
percentageofaveragetotalassets ............. 0.21% 0.19% 0.47% 0.40% 0.55%
Earningsapplicabletocommonshareholdersasa
percentageofaveragetotalequity ............. 4.80% 4.63% 11.37% 9.31% 11.71%
Dividendspercommonshareasapercentageof
basicearningspercommonshare ............. 39.28% 42.60% 16.15% 19.94% 16.70%
Averagetotalequityasapercentageofaveragetotal
assets ................................... 4.39% 4.06% 4.10% 4.31% 4.68%
Netinterestincomeasapercentageofaveragetotal
interest-earningassets ...................... 1.04% 1.06% 0.97% 0.92% 0.94%
Creditqualitydata:
Allowanceforcreditlosses .................... ¥ 1,240,456 ¥ 1,285,507 ¥ 1,335,987 ¥ 1,094,420 ¥ 1,055,479
Allowanceforcreditlossesasapercentageof
loans .................................... 1.42% 1.39% 1.36% 0.99% 0.89%
Impairedloans .............................. ¥ 1,893,098 ¥ 2,031,868 ¥ 2,200,766 ¥ 1,861,027 ¥ 1,686,806
Impairedloansasapercentageofloans........... 2.16% 2.20% 2.23% 1.69% 1.43%
Allowanceforcreditlossesrelatedtoimpairedloans
asapercentageofimpairedloans ............. 39.30% 42.92% 43.39% 40.32% 36.00%
Netloancharge-offs.......................... ¥ 342,100 ¥ 173,370 ¥ 112,862 ¥ 153,748 ¥ 150,666
Netloancharge-offsasapercentageofaverage
loans .................................... 0.39% 0.20% 0.12% 0.15% 0.13%
Averageinterestratespread.................... 0.99% 1.02% 0.93% 0.89% 0.90%
Risk-adjustedcapitalratiocalculatedunderJapanese
GAAP(5) ................................. 14.89% 14.91% 16.68% 15.53% 15.68%
Notes:
(1) InterestincomeforthefiscalyearendedMarch31,2012includesagainof¥139,320millionontheconversionrateadjustmentof
MorganStanley’sconvertiblepreferredstock.Exclusiveoftheone-timegainassociatedwiththeconversion,interestincomewouldhave
beenlowerforthefiscalyearendedMarch31,2012.
(2) IncludesthecommonsharesthatwerepotentiallyissuableuponconversionoftheClass11PreferredStock.
(3) Preferreddividendswere¥57.5pershareandpaidsemi-annually.InApril2014,weacquiredandcancelledalloftheissuedsharesof
FirstSeriesofClass5PreferredStock.Asaresult,thereiscurrentlynoissuedClass5PreferredStock.SeeNote16toouraudited
consolidatedfinancialstatementsincludedelsewhereinthisAnnualReport.
(4) Preferreddividendswere¥2.65pershareandpaidsemi-annually.InAugust2014,weacquiredalloftheissuedsharesofClass11
PreferredStockinexchangefor1,245sharesofourcommonstockheldintreasury,andcancelledtheacquiredshares.SeeNote16to
ourauditedconsolidatedfinancialstatementsincludedelsewhereinthisAnnualReport.
(5) Risk-adjustedcapitalratioshavebeencalculatedinaccordancewithJapanesebankingregulationsasapplicableontherelevant
calculationdate,basedoninformationderivedfromourconsolidatedfinancialstatementspreparedinaccordancewithJapaneseGAAP.
Foradescriptionoftheapplicablecapitalratiocalculationandotherrequirementsapplicable,see“Item4.B.Informationonthe
Company—BusinessOverview—SupervisionandRegulation—Japan—Capitaladequacy”and“Item5.B.OperatingandFinancial
ReviewandProspects—LiquidityandCapitalResources—CapitalAdequacy.”
6
ExchangeRateInformation
Thetablesbelowsetforth,foreachperiodindicated,certaininformationconcerningtherateofexchangeof
JapaneseyenperU.S.$1.00basedonexchangerateinformationfoundonBloomberg.OnJuly13,2015,the
closingexchangeratewas¥123.43toU.S.$1.00andtheinverseratewasU.S.$0.81to¥100.00.
Year2015
February March April May June July(1)
High .................................... ¥120.48 ¥122.03 ¥120.84 ¥124.46 ¥125.86 ¥123.73
Low..................................... ¥116.66 ¥118.33 ¥118.50 ¥118.89 ¥121.94 ¥120.41
Note:
(1) PeriodfromJuly1,2015toJuly13,2015.
FiscalyearsendedMarch31,
2011 2012 2013 2014 2015
Average(ofmonth-endrates) ........................... ¥84.99 ¥78.90 ¥83.32 ¥100.38 ¥110.82
B. CapitalizationandIndebtedness
Notapplicable.
C. ReasonsfortheOfferandUseofProceeds
Notapplicable.
D. RiskFactors
Investinginoursecuritiesinvolvesahighdegreeofrisk.Youshouldcarefullyconsidertherisksdescribed
inthissection,whichisintendedtodisclosealloftherisksthatweconsidermaterialbasedontheinformation
currentlyavailabletous,aswellasalltheotherinformationinthisAnnualReport,includingourconsolidated
financialstatementsandrelatednotes,“Item5.OperatingandFinancialReviewandProspects,”“Item11.
QuantitativeandQualitativeDisclosuresaboutCredit,MarketandOtherRisk”and“SelectedStatisticalData.”
Ourbusiness,operatingresultsandfinancialconditioncouldbemateriallyandadverselyaffectedbyanyof
thefactorsdiscussedbelow.Thetradingpriceofoursecuritiescoulddeclineduetoanyofthesefactors.This
AnnualReportalsocontainsforward-lookingstatementsthatinvolverisksanduncertainties.Ouractualresults
coulddiffermateriallyfromthoseanticipatedintheseforward-lookingstatementsasaresultofvariousfactors,
includingthosedescribedinthissectionandelsewhereinthisAnnualReport.See“Forward-Looking
Statements.”
RisksRelatedtoOurBusiness
BecausealargeportionofourassetsaswellasourbusinessoperationsareinJapan,wemayincur
lossesifeconomicconditionsinJapanworsen.
OurperformanceisparticularlyaffectedbythegeneraleconomicconditionsofJapanwhereweare
headquarteredandconductasignificantamountofourbusiness.AsofMarch31,2015,60.3%ofourtotalassets
wererelatedtoJapanesedomesticassets,includingJapanesenationalgovernmentandJapanesegovernment
agencybonds,whichaccountedfor70.0%ofourtotalinvestmentsecuritiesportfolioand13.0%ofourtotal
assets,respectively.Interestandnon-interestincomeinJapanrepresented52.6%ofourtotalinterestandnon-
interestincomeforthefiscalyearendedMarch31,2015.Furthermore,asofMarch31,2015,ourloansinJapan
accountedfor59.1%ofourtotalloansoutstanding.
7
ThereissignificantuncertaintysurroundingJapan’seconomy.Forexample,Japan’sfiscalhealthand
sovereigncreditworthinessmaydeteriorateiftheJapanesegovernment’seconomicmeasuresandtheBankof
Japan’smonetarypoliciesproveineffectiveorresultinnegativeconsequences.IfthepricesofJapanese
governmentbondsdeclinerapidly,resultinginanunexpectedlysuddenincreaseininterestrates,ourinvestment
securitiesportfolioaswellasourlending,borrowing,tradingandotheroperationsmaybenegativelyimpacted.
Inrecentperiods,majorcreditratingagencieshavedowngradedthecreditratingsofJapan’ssovereigndebt,
includingadowngradebyMoody’sInvestorService,Inc.inDecember2014andadowngradebyFitchRatings,
Ltd.inApril2015.
InstabilityintheJapanesestockmarketandforeigncurrencyexchangeratesmayalsohaveasignificant
adverseimpactonourassetandliabilitymanagementaswellasourresultsofoperations.Variousotherfactors,
includingstagnationordeteriorationofeconomicandmarketconditionsinothercountries,andgrowingglobal
competition,mayalsohaveamaterialnegativeimpactontheJapaneseeconomy.Foradetaileddiscussiononthe
businessenvironmentinJapanandabroad,see“Item5.OperatingandFinancialReviewand
Prospects—BusinessEnvironment.”
SinceourdomesticloansinJapanaccountedforasignificantportionofourloanportfolio,deterioratingor
stagnanteconomicconditionsinJapanmaycauseadverseeffectsonourfinancialresults,suchasincreasesin
creditcosts,asthecreditqualityofsomeborrowerscoulddeteriorate.Forexample,duetotheintensifyingglobal
competitionandweakeningconsumerspendinginrecentperiods,someJapanesecompanies,including
electronicsmanufacturers,haveexperiencedsignificantfinancialdifficulties.Forafurtherdiscussion,
see“—RisksRelatedtoOurBusiness—Wemaysufferadditionalcredit-relatedlossesinthefutureifour
borrowersareunabletorepaytheirloansasexpectedorifthemeasureswetakeinreactionto,orinanticipation
of,ourborrowers’deterioratingrepaymentabilitiesproveinappropriateorinsufficient.”
Iftheglobaleconomydeterioratesfurther,ourcredit-relatedlossesmayincrease,andthevalueofthe
financialinstrumentsweholdmaydecrease,resultinginlosses.
Globaleconomicconditionsremainvolatile,anditisuncertainhowtheglobaleconomywillevolveover
time.TheshiftinthemonetarypolicyintheUnitedStates,theprolongedeconomicstagnationinEurope,
slowingeconomicgrowthinChinainthemidstofashiftinthegovernment’seconomicpolicy,andthepolitical
turmoilinvariousregionsaroundworldcouldnegativelyimpactwidermarkets,includingthoseofboth
emerginganddevelopedcountries.AsofMarch31,2015,basedprincipallyonthedomicileoftheobligors,
assetsrelatedtoEuropeaccountedforapproximately9.9%ofourtotalassets,assetsrelatedtoAsiaandOceania
excludingJapanaccountedforapproximately9.3%ofourtotalassets,andassetsrelatedtotheUnitedStates
accountedforapproximately16.5%ofourtotalassets.Iftheglobaleconomydeterioratesortheglobaleconomic
recoverysignificantlyslowsdownagain,theavailabilityofcreditmaybecomelimited,andsomeofour
borrowersmaydefaultontheirloanobligationstous,increasingourcreditlosses.Inaddition,concernsoverthe
sovereigndebtprobleminsomeEuropeancountriesmaylimitliquidityintheglobalfinancialmarkets.Someof
ourcreditderivativetransactionsmayalsobenegativelyaffected,includingtheprotectionwesoldthroughsingle
namecreditdefaultswaps,andindexandbasketcreditdefaultswaps.Thenotionalamountsoftheseprotections
soldasofMarch31,2015were¥2,583.2billionand¥791.1billion,respectively.Inaddition,ifcreditmarket
conditionsworsen,ourcapitalfundingstructuremayneedtobeadjustedorourfundingcostsmayincrease,
whichcouldhaveamaterialadverseimpactonourfinancialconditionandresultsofoperations.
Furthermore,wehaveincurredlosses,andmayincurfurtherlosses,asaresultofchangesinthefairvalue
ofourfinancialinstrumentsresultingfromweakeningmarketconditions.Forexample,declinesinthefairvalue
ofourinvestmentsecurities,particularlyequityinvestmentsecurities,resultedinourrecordingimpairmentlosses
of¥124.2billion,¥6.5billionand¥5.9billionforthefiscalyearsendedMarch31,2013,2014and2015,
respectively.AsofMarch31,2015,approximately33.7%ofourtotalassetswerefinancialinstrumentsforwhich
wemeasurefairvalueonarecurringbasis,andlessthan0.5%ofourtotalassetswerefinancialinstrumentsfor
whichwemeasurefairvalueonanon-recurringbasis.Generally,inordertoestablishthefairvalueofthese
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instruments,werelyonquotedprices.Ifthevalueofthesefinancialinstrumentsdeclines,acorrespondingwrite-
downmayberecognizedinourconsolidatedstatementsofincome.Inaddition,becauseweholdalargeamount
ofinvestmentsecurities,short-termfluctuationsinthevalueofoursecuritiesmaytriggerlossesorexitcostsfor
ustomanageourrisk.Formoreinformationonourvaluationmethodforfinancialinstruments,see
“Item5.OperatingandFinancialReviewandProspects—CriticalAccountingEstimates.”
Ourbusinessoperationsareexposedtorisksofnaturaldisasters,terrorismandotherdisruptionscaused
byexternalevents.
AsamajorfinancialinstitutionincorporatedinJapanandoperatinginmajorinternationalfinancialmarkets,
ourbusinessoperations,ATMsandotherinformationtechnologysystems,personnel,andfacilitiesandother
physicalassetsaresubjecttotherisksofearthquakes,typhoons,floodsandothernaturaldisasters,terrorismand
otherpoliticalandsocialconflicts,healthepidemics,andotherdisruptionscausedbyexternalevents,whichare
beyondourcontrol.Asaconsequenceofsuchexternalevents,wemayberequiredtoincursignificantcostsand
expensesforremedialmeasuresorcompensationtocustomersortransactioncounterpartiesforresultinglosses.
Wemayalsosufferlossofbusiness.Inaddition,suchexternaleventsmayhavevariousothersignificantadverse
effects,includingdeteriorationineconomicconditions,declinesinthebusinessperformanceofourborrowers
anddecreasesinstockprices,whichmayresultinhighercreditcostsorimpairmentorvaluationlossesonthe
financialinstrumentswehold.Theseeffectscouldmateriallyandadverselyaffectourbusiness,operatingresults
andfinancialcondition.
AswithotherJapanesecompanies,weareexposedtoheightenedrisksoflarge-scalenaturaldisasters,
particularlyearthquakes.Inparticular,alarge-scaleearthquakeoccurringintheTokyometropolitanareacould
resultinmarketdisruptionsorsignificantdamageto,orlossesof,tangibleorhumanassetsrelatingtoour
businessandcounterpartiesbecausemanyofourimportantbusinessfunctionsandmanyofthemajorJapanese
companiesandfinancialmarketsarelocatedinthearea.Inaddition,suchanearthquakecouldcausealonger-
termeconomicslowdownandadowngradeofJapan’ssovereigncreditratingduetoincreasesingovernment
spendingfordisasterrecoverymeasures.
Ourriskmanagementpoliciesandproceduresmaybeinsufficienttoaddresstheconsequencesofthese
externalevents,resultinginourinabilitytocontinuetooperateapartorthewholeofourbusiness.Inaddition,
ourredundancyandbackupmeasuresmaynotbesufficienttoavoidamaterialdisruptioninouroperations,and
ourcontingencyandbusinesscontinuityplansmaynotaddressalleventualitiesthatmayoccurintheeventofa
materialdisruptioncausedbyalarge-scalenaturaldisastersuchastheMarch2011GreatEastJapanEarthquake,
whichledtotsunamis,soilliquefactionandfires,aswellaselectricitypowersupplyshortagesandelectricity
powerconservationmeasuresresultingfromthesuspensionoftheoperationsofthenuclearpowerplants.
Wemaysufferadditionalcredit-relatedlossesinthefutureifourborrowersareunabletorepaytheir
loansasexpectedorifthemeasureswetakeinreactionto,orinanticipationof,ourborrowers’deteriorating
repaymentabilitiesproveinappropriateorinsufficient.
Whenwelendmoneyorcommittolendmoney,weincurcreditriskwhichistheriskoflossesifour
borrowersdonotrepaytheirloans.Wemayincursignificantcreditlossesorhavetoprovideforasignificant
amountofadditionalallowanceforcreditlossesif:
‰ largeborrowersbecomeinsolventormustberestructured;
‰ domesticorglobaleconomicconditions,eithergenerallyorinparticularindustriesinwhichlarge
borrowersoperate,deteriorate;
‰ thevalueofthecollateralwehold,suchasrealestateorsecurities,declines;or
‰ weareadverselyaffectedbycorporatecredibilityissuesamongourborrowers,toanextentthatisworse
thananticipated.
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