Filed at 3:55 a.m. ET

TOKYO, May 19 (Reuters) - Mitsubishi UFJ Financial Group (NYSE:MTU) , Japan's biggest bank, reported a $2.7 billion annual loss, its first since forming four years ago, hit by a damaging recession and big losses on its stock portfolio, but forecast a rebound.

MUFG said it lost 256.95 billion yen ($2.7 billion) in the year to end-March, compared with a net profit of 636.6 billion yen a year earlier. The net loss is the bank's first since it was formed in a 2005 merger.

Mitsubishi UFJ, which last year paid $9 billion for a 21 percent stake in U.S. investment bank Morgan Stanley (NYSE:MS) , said it expects a current year net profit of 300 billion yen ($3.1 billion), roughly in line with an average net profit estimate of 291.4 billion yen in a poll of 15 analysts by Thomson Reuters. (NYSE:TRI) (TSX:TRI)

Japan's three largest banks together lost 1.2 trillion yen in the year just ended, due to surging credit costs and a slide in the value of their huge equity holdings.

Second-ranked Mizuho Financial Group (NYSE:MFG) last week reported a 588.8 billion yen loss for the year and said it may raise up to 800 billion yen in new capital. No.3 lender Sumitomo Mitsui Financial (OOTC:SMFJY) Group lost 373.5 billion yen for the year.

Credit costs, which include the money set aside to cover bad loans, have increased sharply as the world's second-largest economy is battered by its worst recession since World War Two.

Shares of Mitsubishi UFJ have gained 14 percent so far this year, while Mizuho is down 10 percent and Sumitomo Mitsui is off 2.7 percent.

MUFG Reports $2.7 Billion Annual Loss