Mitsubishi UFJ Financial : MUFG Report 2021 (JGAAP) （PDF / 6.97MB）

Committed to empowering a brighter future.

MUFG Report 2021

Integrated Report

Mitsubishi UFJ Financial Group

Introduction		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
	Value Creation		and Performance		Governance		Corporate Data

In the coming era of centenarians, what will you do next?

As you move on to the next life stage, we, too, will move on to empower you.

Committed to empowering a brighter future.

A new Green Bond project, sharply focused on financing renewable energy and energy-saving projects, is set to launch.

We acted fast establish a medical fund worth a total of ¥10.0 billion to facilitate the development of vaccines and remedies.

CONTENTS

Introduction

03 MUFG Way

05 Message from the CEO

14 A Guide to Quickly Understanding Where MUFG Is Now

MUFG's Pursuit of Value Creation

15 MUFG's History

1. The Seven Business Group Structure

1. MUFG's Unique Strengths

1. Value Creation Process

1. Stakeholder Engagement

25 Sustainability Management Focused on Addressing 10 Priority Issues

27 Response to Opportunities and Risks

Management Strategies and Performance

29 Review of the Medium-Term Business Plan (MTBP)

1. Overview of the New Medium-Term Business Plan (MTBP)

1. Message from the CFO

1. Financial Review for Fiscal 2020

1. Eleven-YearSummary of Major Financial Data

1. Financial and Non-Financial Highlights

1. Business Group Performance

1. Digital Service Business Group (DS)

1. Retail & Commercial Banking Business Group (R&C)

1. Japanese Corporate & Investment Banking Business Group (JCIB)

1. Global Corporate & Investment Banking Business Group (GCIB)

1. Global Commercial Banking Business Group (GCB)

1. Asset Management & Investor Services Business Group (AM/IS)

1. Global Markets Business Group

1. Evolving into a Financial and Digital Platform Operator

1. Transform Our Corporate Culture

1. Human Resources Strategy

1. Sustainability Initiatives

1. Message from the Chief Sustainability Officer (CSuO)
2. Climate Change Measures & Environmental Protection

79 Climate Change Measures & Environmental Protection (Disclosure Based on TCFD Recommendations)

83 Addressing Issues Society Is Now Confronting

86 ESG-Related External Recognition and Participation in Global Initiatives

Leadership and Governance

87 Dialogue between Outside Directors and Institutional Investors

1. Corporate Governance

1. Risk Management

1. Cyber Security

1. Compliance

1. Internal Audit
2. Initiatives for Practicing a Customer-Oriented Approach

Financial Data / Corporate Data

109 Consolidated Financial Statements

1. Performance Comparisons with Competitors
2. Company Overview

Editorial Overview

To best explain our efforts to create sustained value to our investors and other stakeholders, we, Mitsubishi UFJ Financial Group, or MUFG, have compiled this integrated report, MUFG Report 2021, with reference to such guidelines as the framework provided by the International Integrated Reporting Council (IIRC)*1 as well as the Guidance for Collaborative Value Creation issued by the Ministry of Economy, Trade and Industry.

Further details on our financial status and sustainability initiatives are available on our website. In addition, our plans call for issuing the MUFG Sustainability Report 2021, a publication detailing our response to sustainability issues, in autumn 2021.

*1 A private-sector foundation established in 2010 by companies, investors, accounting organizations and administrative agencies to develop an international framework for corporate reporting.

Definitions of Specific Terms Used in This Report

MUFG/The Group:

Mitsubishi UFJ Financial Group, Inc. and its subsidiaries and affiliates The Bank: MUFG Bank, Ltd.

The Trust Bank: Mitsubishi UFJ Trust and Banking Corporation The Securities:

Mitsubishi UFJ Securities Holdings Co., Ltd. and its subsidiaries NICOS: Mitsubishi UFJ NICOS Co., Ltd.

MUAH: MUFG Americas Holdings Corporation

Krungsri (KS): Bank of Ayudhya Public Company Limited

Bank Danamon (BDI): PT Bank Danamon Indonesia, Tbk.

FSI: First Sentier Investors Holdings Pty Ltd

DS: Digital Service Business Group

R&C: Retail & Commercial Banking Business Group

JCIB: Japanese Corporate & Investment Banking Business Group

GCIB: Global Corporate & Investment Banking Business Group

GCB: Global Commercial Banking Business Group

AM/IS: Asset Management & Investor Services Business Group

Global Markets: Global Markets Business Group

Disclaimer

This report contains forward-looking statements with regard to the expectations, forecasts, targets and plans of Mitsubishi UFJ Financial Group, Inc. and its subsidiaries and affiliates. These forward-looking statements are based on information currently available to the Group and are stated in this document on the basis of the outlook at the time that this document was produced. In producing these forward-looking statements, certain assumptions (premises) have been utilized that are subjective and may prove to be incorrect. Should any underlying assumption prove to be incorrect, actual results in the future may vary materially from some of the forward-looking statements in this document. The Group has no obligation or intent to update any forward- looking statements contained in this document. In addition, information on companies and other entities outside the Group that is included in this document has been obtained from publicly available information and other sources. The accuracy and appropriateness of that information has not been verified by the Group and cannot be guaranteed. All figures contained in this report are calculated according to generally accepted accounting principles in Japan, unless otherwise noted.

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Introduction

MUFG Way

MUFG has newly defined its Purpose while formulating

the MUFG Way (previously the Corporate Vision) in line with this Purpose. The MUFG Way is designed to provide guiding principles

for all our business activities and consists of our Purpose, Values and Vision.

Introduction		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
	Value Creation		and Performance		Governance		Corporate Data

To Empower All Our Stakeholders

The challenges faced by our stakeholders will be the starting point for our strategic proposals and their execution. Through our actions, we will help all of our stakeholders resolve challenges confronting them.

			MUFG Way
			Purpose
			Committed to empowering a brighter future.
			Values
Values	Purpose	Vision	1. Integrity and Responsibility
2. Professionalism and Teamwork
			3. Challenge Ourselves to Grow

Vision

Be the world's most trusted financial group

To empower our	To empower our	To empower the
customers and	communities and	future
business partners	society	generations
Across generations,	We will make our	We will help create a
we will empower our	society more resilient	world in which
customers to achieve	by upgrading the	human society and
a quality of life that	reliability and stability	the natural
affirms who they are.	of our functions	environment can co-
We will assist our	and by pursuing	exist in harmony.
customers in thriving	innovation.
amid these rapidly	We will contribute to
changing times and	the digital shift
achieving sustainable	across society.
growth.

To empower the

employees of

MUFG

We will provide our employees with opportunities for personal growth and offer an environment in which they can direct their energies into working with a sense of fulfillment.

To empower shareholders

We will live up to shareholder expectations by continuously enhancing our business sustainability and corporate value.

Code of Conduct

Code of Conduct

Purpose

Committed to empowering a brighter future.

Today, all of our stakeholders are striving to overcome challenges and

find a way to the next stage toward sustainable growth.

We at MUFG will make every effort to help realize these goals. This will be our unchanging purpose now, and into the future.

Values

In addition to our unchanging primary value of Integrity and Responsibility,

we also value Professionalism and Teamwork and will Challenge Ourselves to Grow.

Vision

By empowering our stakeholders to find a way to the next stage toward sustainable growth,

we will make every effort to become an indispensable partner for them and to be the world's most trusted financial group.

Reorganized Positioning of Business Strategies Based on Purpose

To live up to our commitment to empowering a brighter future in line with our Purpose, over the next three years we will implement the business strategies presented below, leveraging our strengths to address the issues our stakeholders are facing.

For the detail of our New Medium-Term Business Plan (MTBP), please also refer to pages 31-34.

					WHAT
					Our value
		Digital services that	proposition for		Appealing investment
		the next 3 years
			are easy to use for		products and
			everyone			investment advice
Recommending optimal	HOW			Will and testament
		services, inheritances,
products and services	Which of
		business succession
					our strengths to
			Advanced	digital	leverage		Japan's largest		A wide variety of
Face-to-face and		technology and
			customer base
				opportunities for
online channels for		abundant data	WHY
the next generation								financing: IPOs,
					The reason for						M&As, etc.
		The solutions	our company's						Cross-border
	capabilities to achieve	existence		Business foundations
			transactions and
Sustainable finance	a sustainable	Committed to	in Japan and Asia,
	overseas business
		environment and	with a global reach
		society	empowering						expansion
Transitioning to 100%				a brighter future.
					A company with
renewable energy		Diversity of human
procurement			a high level of
	resources on a global basis		Stable provision of
			soundness and stability
											funds
Next-generation support
		Inclusion and diversity			High-quality and
				robust systems and
					Opportunities for growth	operations
					and job satisfaction

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Message from the CEO

Introduction		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
	Value Creation		and Performance		Governance		Corporate Data

Declaring Our Purpose	Assessing Our
	Environment & Challenges

• Committed to empowering
  a brighter future."

Propelling Innovation

Hironori

Kamezawa

President & Group CEO

Over the past couple of years - particularly since the pandemic began to force deep institutional and behavioral changes across society - I found myself asking, "What ultimate relevant purpose should MUFG be serving today?"

We of course have long understood our practical function as a financial institution. But how we expressed our vision and mission has been hard to intuit. We needed a direct, simple phrase to capture why we take pride in our work and believe it's vital.

So I took out a pen and wrote the following as a rough draft: "We provide safe, secure and highly convenient financial services that customers can delight in using." Obviously, this was just a start, but it prompted opinions from others throughout the organization, and we embarked on an energetic discussion to refine our thinking.

Our fundamental question was how MUFG can equip stakeholders to deal effectively with drastic shifts in social and lifestyle norms. We agreed we feel a profound duty to act as a partner for customers and communities, moving forward alongside them, and sometimes taking the lead in instituting beneficial change.

This is how we arrived at the phrase, Committed to empowering a brighter future. And today, this is how we now define our purpose.

MUFG aspires to support our customers, employees, shareholders, investors and all other stakeholders in their 'next step forward' - whatever positive step they wish that to be; and to act as a constructive force for the earth's natural environment and society as a whole.

As a result of this collective exercise - in itself an emblematic process of collaborative engagement - we've vitalized our management vision, as presented in The MUFG Way, and positioned our Purpose at its center.

How then do we help our stakeholders take that next step forward?

We start by addressing two society-altering sea changes: Digital and Green.

Regarding the first, manifestations of finance's role in a Digital society have clearly arrived. Money itself is morphing toward a form of pure data, so financial services are becoming a subset of digital services. Once these services are fully digitalized, data regarding consumer behavior will be handled like settlement and other transactional data. In this way, finance is becoming a ubiquitous service connected to a vast spectrum of life events and transactional scenarios.

Regarding Green, climate change is an existential threat to humanity, and in my view should be the highest-priority item on the international community's agenda. For its part, the Japanese government has issued a carbon neutrality declaration, and other efforts to address the issue are gaining momentum across a variety of fields. The trend may well induce drastic structural shifts, including in the industrial sector.

Finance is playing more of a central role in these two trends, and we expect major business opportunities to emerge as a result. Some novel financial services from industry newcomers are rising in popularity, but financing must be extended safely, securely and consistently. This is why we are confident that the trust MUFG has earned over the years places us in a position of strength and stability as society navigates disruptive trends. We are also positioned to be bold innovators; the fact is, our Group operations have deep, unique capabilities to meet a wide range of needs arising from shifts in industrial structure.

We're equipping ourselves to analyze such shifts with accuracy, and to find opportunities in trends

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Message from the CEO

Introduction		MUFG's Pursuit of		Management Strategies		Leadership and		Financial Data /
	Value Creation		and Performance		Governance		Corporate Data

like Digital and Green to fuel significant growth

• for ourselves and our clientele. In the coming era, we intend to pioneer mechanisms that extract value from the digital shift, address climate-change issues and solve social problems caused by these and other forces.

Meanwhile, the traditional business environment for banking remains harsh. With slow economic expansion and low interest rates as the lingering norm, we can no longer rely on established patterns of our commercial business to generate substantial growth. In this rapidly changing environment - accelerated by pandemic-fueled upheavals - our relevance depends on more than just business-as-usual banking.

MUFG stock price reflects this severity, with a Price Book-value Ratio (PBR) persistently below

0.5. Obviously, all members of MUFG management take this issue very seriously. Two reasons explain the stagnation. First, our capital management is not efficient enough. Second, we are failing to articulate a clear path toward growth and to realizing our vision. We know prolonged low interest rates are no longer an excuse. We must openly push business-model reforms forward at an even faster pace.

Outcomes & Issues

From Our Previous

Three-Year Plan

Our aim throughout the three years of our previous Medium-Term Business Plan - under the banner of the MUFG Re-Imagining Strategy*1 - was the transition to a business model adaptable to a low interest rate environment. These three years were positioned as the first half of a six-year course of structural reforms.

So far, we've focused on integrating management structures across all MUFG Groups, such as the corporate lending operations of the Bank and the Trust Bank. We've

also promoted structural reforms using digital technologies. These efforts help optimize how we allocate resources, including management, across our enterprise.

We've expanded our overseas business portfolio as well, building on a long-term strategy that commenced in 2008 with our investment in Morgan Stanley; making the U.S.-based Union Bank a wholly-owned subsidiary that same year; and acquiring the Thailand-based Bank of Ayudhya (Krungsri) in 2013. In 2019, Indonesia- based Bank Danamon, along with Australia-basedasset-management specialists First Sentier Investors (FSI), joined our constellation as subsidiaries. Our business portfolio has progressively grown more extensive, freeing us to diversify both profit sources and risks on a global basis. This portfolio of business assets equips us with a unique source of strength that no others in Japan's financial industry can claim.

To be sure, we faced other challenges as we focused on overseas expansion. For instance, the earning power of our domestic commercial banking business is ebbing. Also, our overseas acquisition strategy has focused too keenly on commercial banks that primarily handle interest- rate dependent businesses like deposits and lending. This makes our structure more sensitive to rate fluctuations and vulnerable to global interest-rate trends. Administrative costs at Head Office have also grown more burdensome, to meet growing demands of overseas regulatory compliance and support more collaboration among Group teams.

But this doesn't mean the overall direction of our MUFG Re-Imagining Strategy has been misguided. Our assessment of trends and deep social shifts at the launch of this strategy four years ago was generally correct. So was our identification of issues to address, and because the COVID-19 pandemic has since given many of them added momentum and significance, we need to gear up our efforts to adapt.

We've made steady progress on certain transformation initiatives by applying our "re- imagining" strategies. We've also identified new issues. For instance, despite headway in developing a structure to support initiatives in such businesses as wealth management, institutional investors, and Global Corporate & Investment Banking, we still face issues in monetizing each of these categories.

We also fell short of targets for ROE and expense ratio under our previous MTBP. Although these shortcomings were due in part to pandemic fallout, I attribute them more to the following: First, our plan for improving ROE depended too much on the size of profit, which we could not raise to the expected level because of low interest rates. Second, we weren't agile enough to respond quickly to changes in the environment, despite strategic adjustments we had made through our previous MTBP, to tighten cost controls and thus make us more nimble.

All members of MUFG management, myself included, share an unprecedented sense of crisis as we face the stark reality of not meeting our MTBP targets for a second consecutive term. We're very aware that in order to flourish, we must do much more than simply fortify the status quo.

What might we do?

Our New Medium-Term Business Plan

One key step was to change our approach to creating our three-year plan.

This time, we began our planning through intense, open discussions among senior leadership throughout the MUFG constellation, starting a year in advance with multiple online sessions. We examined our strengths and

obstacles to shape a shared view of our future, with not only business but also social forces sharply in mind

We agreed that MUFG's distinctive strength lies in our customer base and brand recognition, cultivated over decades, if not centuries; and also in our safe and secure financial infrastructure, our comprehensively capable Group operations and our extensive network with global reach. We respected the imperative to maintain unparalleled strength in our home market if we are to be relevant on the world stage.

On the other hand, we accepted that a number of issues need serious attention. These include our too-conservative culture - a weakness when addressing customer needs - and our lack of flexibility and executional speed.

So we devoted considerable effort in the summer of 2020 deliberating what MUFG should aim to be in these times. We did this with the emblematic backdrop of our pandemic response, which showcased our company as a resilient institution society can rely on, with trust, when society itself is struggling. Our business-group heads and their teams then began forming strategies, with outside directors invited to add their multifaceted perspectives to our lively discussions.

The result was our new Medium-Term Business Plan.

Through the next three years, this MTBP will guide our transformation into what we aspire to be: The premier business partner that pioneers the future through the power of finance and digital services by developing and deploying a business model aligned with Digital, Green and other pertinent megatrends.

One key word for this transformation is speed, which is tied to our tolerance for risk. We will always be prudent, but we cannot allow slow decision-making or excessive risk-aversion to make us hesitate to address tough changes

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