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MUFG Americas credit card book suffers 15.5% loss rate in stress test

A company-run stress test projects a $3.93 billion loss at MUFG Americas Holdings Corp. following a severely adverse scenario.

The midcycle Dodd-Frank stress test covers the third quarter of 2017 through the third quarter of 2019 and factors in a hypothetical trade war, "retail apocalypse," recession in the Eurozone and premature U.S. rate hikes.

Under the hypothetical scenario, the company expects to report pre-provision net revenue of $702.3 million, as well as a $3.89 billion provision for loan and lease losses, a $53.9 million realized loss on securities and about $682.0 million in other losses. Of its hypothetical loan losses, $1.47 billion will be from its commercial and industrial book, and $1.30 billion will be from its domestic commercial real estate portfolio. Those figures represent portfolio loss rates of 8.0% and 9.9%, respectively. The credit card book is expected to suffer a 15.5% loss rate, with $39.1 million in losses. Other consumer will be hit with a loss of $62.5 million, or 13.5%.

During the nine quarters, MUFG Americas' common equity Tier 1 and Tier 1 risk-based capital ratios are both expected to hit 14.7% at their lowest, well above the respective regulatory minimums of 4.5% and 6.0%. The total risk-based capital ratio may drop to 16.5% and the Tier 1 leverage ratio to 9.5%. The regulatory minimums for those are 8.0% and 4.0%, respectively.

MUFG Americas is a subsidiary of Japan's Mitsubishi UFJ Financial Group Inc.