Mitsubishi UFJ Financial Group (NYSE:MTU) (also known as MUFG) is the world's largest bank holding company by total assets. Despite having the most assets, the Japanese bank holding company is smaller in terms of market capitalization than other large money-center banks, like Wells Fargo (WFC), J P Morgan Chase (JPM), and Bank of America (BAC). The market's lower valuation stems from Mitsubishi's historically low return on assets (ROA).
The Japanese bank runs a conservative book compared to industry peers, with a loan-to-capital ratio of 68%. While this has limited ROA/earnings, it has kept the bank from having capital issues as European and American competitors, such as Lehman Brothers (LEH), UBS AG (UBS), and Citigroup (C). Mitsubishi uses bank deposits and short-term borrowings to originate loans to corporations, governments, and individuals. MUFG also invests in Equities and bonds.
While the company is Japanese, its ADR is publicly traded (NYSE: MTU). Not only does Mitsubishi's financial health and outlook affect the share price, but also the Yen/USD exchange rate. The company records earnings and assets in its local currency, so an appreciation of the Yen benefits the ADR price and increases the nominal value of dividends on its ADR shares, as it earns more in terms of US dollars. A bit suprriesd it seems to simple and yet useful.
Umm, are you really just giving this info out for notinhg?
The value of the Yen compared to the US dollar impacts the value of ADR shares of MUFG and its business operations. Mitsubishi's stock is listed on the NYSE. An increase in the value of the Yen translates to higher share price and dividend payments in the ADR shares all else constant. An appreciating Yen can purchase more US dollars. However, on the flipside, a strengthening Yen adversely impacts parts of MUFG's business. Not all foreign borrowers hedge currency, so if they took a loan out in term of Yen dollars, and the Japanese currency appreciates, this increases the payment burden on the borrower. The pressure increases borrower defaults. Further, if MUFG does not hedge its foreign loans, currency movements impact earnings.
Wonderful explanation of facts aviaallbe here.
I really couldn't ask for more from this atricle.