Japan’s three megabanks made a strong start to the financial year, achieving between 35% and 38% of their full-year net profit targets in the first quarter of the fiscal year that started April 1.
A weaker Japanese yen coupled with higher demand for loans as monetary policy normalized contributed to earnings growth at all three megabanks in the April-to-June quarter. All three expect record net profits for the fiscal year that ends March 31, 2025.
"For all of them [the megabanks], the margins between their deposit and lending rates have been improving since Japan's central bank started a shift to the monetary policy normalization in March," said Toyoki Sameshima, a senior analyst at SBI Securities Co.
Sumitomo Mitsui Financial Group Inc. achieved 35% of its projected net income of ￥1.06 trillion for the full year as its earnings surged 49.6% over the year to ￥371.4 billion.
Mitsubishi UFJ Financial Group Inc. posted a 0.4% decline in net income from a year ago at ￥555.8 billion due to a change in reporting period of an overseas subsidiary. Japan's largest bank by assets still attained 37% of the ￥1.95 trillion in earnings planned for the full year.
Mizuho Financial Group Inc. posted a 17.9% gain in net income of ￥289.3 billion, which is 38% of its full-year earnings target of ￥750 billion.
Policy tightening
The BOJ decided to raise its short-term policy rate to about 0.25% from a range of zero to 0.1% and to halve its monthly purchases of Japanese government bonds to ￥2.9 trillion by the first three months of 2026 on July 31, a statement from the central bank said. The JGB purchase reduction will ease demand for the market, pushing market interest rates higher.
Subsequently, the three megabanks said they will raise their short-term prime rate, a benchmark commonly used for housing loans, to 1.625% from 1.475%.
The three megabanks expect the Bank of Japan's accelerated tightening of its monetary policy to boost net interest margins as domestic loan demand remains strong.
MUFG's outstanding domestic loans grew 9.3% from a year earlier to ￥72.7 trillion, while its overseas lending climbed 11.3% to ￥49.1 trillion. Mizuho's domestic loans increased 3.4% to ￥56.9 trillion, while its overseas lending shrank 8.5% to $236.5 billion. SMFG's loans at home increased 5.4% to ￥64.3 trillion, while its overseas lending edged up 1% to $284 billion, according to an earnings statement.
The yen's depreciation against the dollar made banks' overseas gains worth more in home currency, which fell to a historic low of ￥161 in late-June. The megabanks' fiscal first quarter earnings were based around this record-low level, whereas the exchange rate was about ￥145 in the same period last year. MUFG posted a currency gain of ￥25 billion in first-quarter net income, and SMFG ￥16 billion.
Banks are also keen to collect more deposits. The three megabanks also said on July 31 that they will raise their savings account rates to 0.1% from 0.02%.
As of Aug. 1, US$1 was equivalent to ¥150.13.