DBRS: MUAH’s 4Q Earnings Decline; Solid Loan & Deposit Growth

Summary:
• Net income of $155 million was down materially sequentially, reflecting weaker trading account activities, lower securities gains and a higher effective tax rate.
• The Company reported solid loan and deposit growth, but DBRS notes that loan growth did outpace core deposit growth in 2014.
• DBRS rates MUFG Americas Holdings Corporation Issuer & Senior Debt at ‘A’ with a Stable trend.

DBRS, Inc. (DBRS) considers MUFG Americas Holdings Corporation’s (MUAH or the Company) 4Q14 results as mediocre. While profitability was weaker than expected, the balance sheet remains strong supported by excellent credit quality and a sound capital position. Moreover, the Company continues to generate solid loan and deposit growth.

Net interest income improved modestly sequentially, as solid loan growth offset net interest margin pressure. However, noninterest income declined a substantial 9% driven by weaker trading account activities and lower securities gains.

Noninterest expense was relatively stable, but remains high. Overall, the Company’s adjusted efficiency ratio increased QoQ to 67.24%, but did improve to 64.63% from 67.85% for the year.

Loans held for investment grew a solid 3% during the quarter driven primarily by commercial and industrial, and residential mortgage lending. Meanwhile, core deposits grew at a faster rate relieving some funding pressure with the loans held for investment portfolio once again being fully funded by core deposits.

Credit quality remains very strong with very low levels of nonperforming assets and a net recovery in the quarter. Meanwhile, capital remains strong as well with a tangible common equity ratio of 10.54%.

DBRS rates MUFG Americas Holdings Corporation Issuer & Senior Debt at ‘A’ with a Stable trend.

Note:
All figures are in U.S. dollars unless otherwise noted.