Japanese megabanks appear on course to achieve their full-year net income targets, thanks to steady loan demand at home and abroad.
Mizuho Financial Group Inc. achieved 40% of its full-year net income goal in the fiscal first quarter, after reporting on July 31 that net income for April to June surged 53.8% year on year to ￥245.1 billion. The bank's target for the fiscal year that started April 1 is ￥610 billion.
Sumitomo Mitsui Financial Group Inc. reported a 1.7% year-over-year decline in net income to ￥248.0 billion, mainly on account of higher costs and provisions. Still, the lender has achieved 30% of its full-year net income target of ￥820 billion.
Both lenders maintained the full-year targets they announced in May when reporting earnings for the fiscal year ended March 31, 2023. Mitsubishi UFJ Financial Group Inc., Japan's biggest lender, is due to announce its first-quarter earnings on Aug. 1. The lender's income target for the year is ￥1.3 trillion.
The megabanks "could get support from steady loan demand for the rest of the year," said Toyoki Sameshima, a senior analyst at SBI Securities Co. The drag from the COVID-19 pandemic is largely over, and lenders "could also be supported by strong capital spending that needs funding," Sameshima said.
Bank of Japan said July 28 that it would be more flexible with its yield curve control policy "nimbly conducting market operations" to allow yield on 10-year Japanese government bonds to rise to 1.0% from the previous 0.5%. Although the central bank did not tinker with its negative interest rates policy, many analysts see the tweaking of the yield curve control policy as a precursor to a possible rate tightening, likely in 2024.
Bank of Japan has kept its ultraloose monetary policy stance, even as most major central banks tightened theirs in an attempt to curb inflation. Higher interest rates abroad are expected to help Japanese banks earn better margins on their overseas loans.
Mizuho's loans in the home market increased to ￥55.0 trillion in the first quarter, up from ￥54.4 trillion in the same period of the previous year, while its lending overseas rose to $257.7 billion from $253.3 billion. It also reported write-backs of ￥27.3 billion on previously incurred provisions.
Sumitomo Mitsui Financial said outstanding loans overseas increased to ￥35.2 trillion during the quarter from ￥34.0 trillion a year ago, while its domestic lending rose to ￥61.0 trillion from ￥58.3 trillion.
Mizuho's net income of the previous year that ended on March 31, 2023, came to ￥555.5 billion, exceeding its target of ￥540 billion, while SMFG generated ￥805.8 billion in net income, more than its target of ￥770 billion.
Overall loans by Japanese banks rose at least 3.0% year over year in every month for the first half of the year. Total loans stood at ￥603.36 trillion in June, according to Bank of Japan data.
As of July 28, US$1 was equivalent to ¥140.41.
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