Analyst Note
| Michael Makdad |We raise our fair value estimate for Mitsubishi UFJ Financial Group, or MUFG, by 10.5% to JPY 685 per share ($6.23 for the ADRs) after it announced a deal to sell California-based Union Bank for $5.5 billion cash and $2.5 billion worth of U.S. Bancorp shares (equivalent to a 2.9% stake in the acquirer). We continue to prefer Sumitomo Mitsui Financial Group, or SMFG, over MUFG among Japanese megabanks. However, the difference in our preference has narrowed somewhat with this positive announcement from MUFG. Our new estimate values MUFG at 0.51 times book value, versus our fair multiple of 0.53 times for SMFG.