The consolidated financial statements of the three mega banking groups were released on the 14th. The results were positive, with two companies upwardly revising their net profit forecasts for the current fiscal year (ending March 2024), due to improvements in lending margins due to rising interest rates both domestically and overseas, and boosting overseas business profits due to the weaker yen.
Sumitomo Mitsui Financial Group (FG) is expected to report a new record high in net income this fiscal year for the first time in 10 years. Mizuho Financial Group also expects to post its third highest net profit ever. Mitsubishi UFJ Financial Group (MUFG) has left its earnings forecast unchanged, but the interim progress rate has reached 71% against this fiscal year’s forecast, which is expected to result in record profits. All companies are expected to achieve solid core business profits.
Signboards of 3 mega banks (in Tokyo)
Photographer: Kiyoshi Ota/Bloomberg
Some market participants believe that the Bank of Japan will end its negative interest rate policy as early as January next year. The latest financial results once again showed that if the Bank of Japan lifts negative interest rates, it is expected that the profits of the three mega-bank groups, which are performing well, will further rise in the future. Each company is expected to have a positive impact of several tens of billions of yen annually on their cash balances.
“I believe that we are finally seeing an end to the long period of deflation, and that we are seeing a world with interest rates.” MUFG President Hiroki Kamezawa said this at a financial results conference, and predicted that “depending on the achievement of the price target, it may be possible to lift the policy early.” “Deposits are important. When it comes to lending, rather than aiming for volume, the volume will follow as a result,” he said.
Estimating the impact after negative interest rates are lifted
MUFG estimates that if yen interest rates rise due to the lifting of negative interest rates, the impact on individual banks’ annual profits will be more than 50 billion yen. Banks collect deposits at low interest rates and use them for lending and investment, so a rise in interest rates directly leads to a rise in profits.
Regarding the impact of the Bank of Japan’s monetary policy on profits, Mizuho FG President Masahiro Kihara said, “Changes in policy interest rates are more significant than long-term interest rates.” He said, “In a world with interest rates, deposits have value.It is important to collect deposits through mass retail and create capital for your business.”
It also announced new estimates that if negative interest rates are lifted and policy interest rates continue to be raised, the annual fund balance will improve by an average of 50 billion yen per 10 basis points (bp, 1bp = 0.01%).
Sumitomo Mitsui FG Group CFO Fumihiko Ito also pointed out, “If negative interest rates are lifted, it will have a big impact on business results.” The lifting of negative interest rates will boost annual net business profits by 30 billion yen and net profits by 20 billion yen.
The key to getting deposits is “Olive,” a new comprehensive financial app launched in March of this year. It provides one-stop financial services such as bank accounts, credit cards, and securities, and its high point return rate has also become a hot topic. The company aims to acquire 12 million accounts over the next five years, and reached 1.2 million accounts in September of this year.
On the other hand, rising interest rates can also have a negative effect on bond investment. Combined with rising US interest rates and a weaker yen, all three companies had significant write-downs on foreign bonds as of the end of September. Mizuho FG President Kihara explained, “We continue to operate with extreme caution.”
However, market participants believe that the rise in interest rates will have a greater positive impact on the three mega-bank groups. Ryoji Yoshizawa, managing director of S&P Global Ratings, points out, “The three major banks and other major banks are strong, so the negative side of rising interest rates, such as unrealized losses on bonds they hold, is not much of a problem.The positive side of rising interest rates is likely to be large.” are doing.
Total net profit for the three mega-banks this term is 2.86 trillion yen
Source: Created from each company’s materials
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2023-11-14 10:35:42
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