Japan's three largest banks expect their net profits to keep rising in the fiscal year that started April 1, helped by strong loan demand abroad.
Sumitomo Mitsui Financial Group Inc. expects a net profit of ￥820 billion in the fiscal year that will end March 31, 2024, the Japanese lender said May 15, after it reported a net profit of ￥805.8 billion in the previous year, a 14% gain over the previous year. The lender has set a target of ￥1 trillion in annual income in the next six years, according to a business plan presented with the results announcement.
Mizuho Financial Group Inc. expects net profit in the new fiscal year to rise to ￥610 billion, from ￥555.5 billion in the year that ended March 31. Mitsubishi UFJ Financial Group Inc. has set a target of ￥1.30 trillion in net profit for the fiscal year, after reporting an income of ￥1.11 trillion in the year that just ended. Net profit grew 4.7% at Mizuho in the last fiscal year, while edging down 1.2% at MUFG.
"Companies tend to rely on loans amid higher interest rates and this will likely continue," SMFG CEO Jun Ohta said with regard to expectations of greater lending growth in international markets, especially the US, where the lender has a significant customer base.
That said, the overall market outlook is uncertain, which will drive up credit costs, Ohta said during a May 15 conference call.
High rates abroad
Japanese lenders, along with their US peers, are bracing for a possible slowdown in the world's biggest economy as its central bank has aggressively raised interest rates to fight against inflation. At home, the Japanese lenders continue to operate in an environment of much lower interest rates; the bank of Japan has said it will keep its ultraloose monetary policy for some time.
"[Global] interest rates will likely remain high," Mizuho CEO Masahiro Kihara said during a call. When interest rates climb, banks can more readily increase lending rates and create a more favorable spread.
Overseas loans grew 11.7% year over year at SMFG to ￥33.2 trillion, according to a company statement. MUFG's loans outside Japan shrank 20.4% to ￥41.2 trillion after it completed the sale of a banking unit in the US in December 2022.
Executives at the three Japanese megabanks during earnings calls expressed concerns about turmoil in the US financial market due to a string of failures at regional banks that have shaken the industry.
In the event of further turmoil, "we'll keep ample capital," MUFG CEO Hironori Kamezawa said at a company press conference May 15.
The banks expect no major change in their operations at home as the central bank will likely maintain its ultraloose monetary policy.