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By Bloomberg

Mitsubishi UFJ Financial Group Inc. shares rose to an almost 10-month high after Japan’s biggest bank said it will buy back stock and unexpectedly posted higher first-half profit.

Shares of the Tokyo-based company climbed 2.2 percent at the close of trading to 659 yen, the highest level since Jan. 24. The benchmark Topix Index dropped 2.5 percent.

Mitsubishi UFJ said on Nov. 14 that it will buy back shares for as much as 100 billion yen ($860 million) and raised its planned full-year dividend to 18 yen from 16 yen. The move may herald a shift by Japanese banks toward boosting shareholder returns and could spur similar actions by lenders such as Sumitomo Mitsui Financial Group Inc., said Toyoki Sameshima, an analyst at BNP Paribas SA.

“It wouldn’t be a surprise if Sumitomo Mitsui buys back shares within the current fiscal year,” which ends March 31, Tokyo-based Sameshima wrote in a note.

Only four of the 86 lenders in the Topix Banks index rose today as stocks plunged after government figures showed Japan unexpectedly went into a recession last quarter. The economy shrank an annualized 1.6 percent after struggling to shake off the impact of an April sales-tax increase.

Mitsubishi UFJ was the only one of Japan’s three biggest banks to report profit growth in the first half, as higher lending abroad made up for shrinking loan income at home. Net income climbed 9.1 percent in the six months ended Sept. 30 to 578.7 billion yen, it said Nov. 14. That beat the 525 billion- yen average estimate of five analysts surveyed.

Abe’s Efforts

Prime Minister Shinzo Abe is trying to spur companies to increase returns to shareholders as part of efforts to boost investment and exit deflation. His government set a minimum target of 8 percent for return on equity for listed companies.

Mitsubishi UFJ will repurchase as many as 180 million shares, or 1.3 percent of outstanding stock, by March 31. That would be its first buyback since 2008, according to data compiled by Bloomberg. Sumitomo Mitsui last bought back shares in 2012, while Mizuho Financial Group Inc. hasn’t done so since 2008, the data show.

The three so-called megabanks raised about 5 trillion yen selling shares from December 2008 to July 2010 to bolster capital in the wake of the global financial crisis.

They have been less generous than global peers in sharing earnings with investors. The banks paid an average 22 percent of profit to shareholders in the year ended March, data compiled by Bloomberg show. That trailed the 32 percent mean dividend payout ratio at Nikkei 225 Stock Average companies and 48 percent at the world’s 40 largest banks by market value for which data are available.