End of deflation has been a boon for the top three banks
04 February 2025 - 15:16
byAnton Bridge
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Tokyo — All three of Japan’s “megabanks” are on course for record annual income after the first nine months of the financial year as they cash in on sales of cross-shareholdings and a boost to margins due to higher interest rates at home.
The end of deflation has been a boon for Japan’s banks, which endured razor-thin margins over seven years of negative interest rates.
Between April and December last year, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group hit 99.9%, 97.9% and 104% of their annual profit forecasts, respectively.
None of the banking groups raised full-year guidance, in each case citing the prospective need to use surplus funds to secure its future financial position.
MUFG’s third-quarter profit jumped 32% to ¥490.74bn from ¥370.64bn a year earlier. SMFG and Mizuho booked leaps over the same period of 54% and 28%, respectively.
Three rate hikes since March 2024 have widened domestic loan spreads, while the return of inflation has encouraged large Japanese corporations, which make up the bulk of each bank’s corporate clients, to take on loans for investments.
Alongside growing calls for better capital allocation from Japanese authorities, investors have encouraged companies to offload their cross-shareholdings and noncore or underutilised assets, generating fees for banks.
The banks’ sale of their own equity holdings has proven another tailwind. MUFG sold ¥225bn of holdings between April and December, with a further ¥248bn agreed to be sold before the end of March 2027. It is aiming to dispose of an additional ¥264bn over that period.
The years of deflation also pushed Japan’s financial groups to look abroad for growth, which has helped push profits to record levels now the domestic market is more profitable.
Overseas loans make up nearly 40% of MUFG’s total loan balance, while its ownership of about 23.5% of Wall Street bank Morgan Stanley generated more than 20% of its profits in the April-December period.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Japan’s megabanks set for record annual profit
End of deflation has been a boon for the top three banks
Tokyo — All three of Japan’s “megabanks” are on course for record annual income after the first nine months of the financial year as they cash in on sales of cross-shareholdings and a boost to margins due to higher interest rates at home.
The end of deflation has been a boon for Japan’s banks, which endured razor-thin margins over seven years of negative interest rates.
Between April and December last year, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group hit 99.9%, 97.9% and 104% of their annual profit forecasts, respectively.
None of the banking groups raised full-year guidance, in each case citing the prospective need to use surplus funds to secure its future financial position.
MUFG’s third-quarter profit jumped 32% to ¥490.74bn from ¥370.64bn a year earlier. SMFG and Mizuho booked leaps over the same period of 54% and 28%, respectively.
Three rate hikes since March 2024 have widened domestic loan spreads, while the return of inflation has encouraged large Japanese corporations, which make up the bulk of each bank’s corporate clients, to take on loans for investments.
Alongside growing calls for better capital allocation from Japanese authorities, investors have encouraged companies to offload their cross-shareholdings and noncore or underutilised assets, generating fees for banks.
The banks’ sale of their own equity holdings has proven another tailwind. MUFG sold ¥225bn of holdings between April and December, with a further ¥248bn agreed to be sold before the end of March 2027. It is aiming to dispose of an additional ¥264bn over that period.
The years of deflation also pushed Japan’s financial groups to look abroad for growth, which has helped push profits to record levels now the domestic market is more profitable.
Overseas loans make up nearly 40% of MUFG’s total loan balance, while its ownership of about 23.5% of Wall Street bank Morgan Stanley generated more than 20% of its profits in the April-December period.
Reuters
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