Mitsubishi UFJ Financial Group Inc is considering a write-down of about ¥100bn ($900mn) after it stopped an information technology project at its credit card business, people with knowledge of the matter said. The charge would stem mainly from the decision to halt the five-year upgrade at its Mitsubishi UFJ Nicos Co card unit, the people said, asking not to be identified. Japan’s biggest bank may announce the move when it reports fiscal-year earnings next month, they said. The Nikkei newspaper, which reported the provisioning plans earlier, said that MUFG will probably keep its forecast for net income of ¥950bn for the year ended March. A spokeswoman for MUFG declined to comment.
MUFG began a plan in 2016 to spend ¥150bn combining IT systems across three different card brands. The bank may now be seeking to build a new system from scratch, having formed a joint venture with US firm Akamai Technologies Inc on a blockchain-based payments network, SMBC Nikko Securities Inc analysts said. The situation “seems highly specific to MUFG, but given the pace of innovation in payment technology and low earnings in retail banking, we think similar problems developing elsewhere in the financial industry could be a risk,” the SMBC Nikko analysts including Shinichiro Nakamura wrote in a note. Japanese banks are grappling with advances in financial technology that could reduce the nation’s relatively high usage of cash. MUFG would become the second major lender to book charges on computer systems recently, after Mizuho Financial Group Inc announced a 500bn yen write-down on fixed assets tied to software at its retail business and plans to close branches.
Shares of MUFG fell 1.1% yesterday in Tokyo, compared with a 0.5% drop in the Topix Banks Index. Systems integration company TIS Inc slid as much as 10%. The Tokyo-based firm has been working on the Nicos project, which was one of its biggest for this fiscal year, Jefferies analyst Hiroko Sato wrote in a report.
Sources and photo-credits: Gulf Times, Bloomberg