Amidst the fiscal first quarter, two of Japan’s behemoth lenders have demonstrated remarkable profitability, surpassing the estimates of financial analysts. This robust commencement of the year foreshadows an anticipated period of substantial achievements.
Sumitomo Mitsui Financial Group disclosed that its net income for the quarter ending June 30 amounted to ¥248 billion ($1.75 billion), surpassing the average forecast of ¥236.1 billion provided by six analysts. However, this figure displayed a marginal 1.8% decline compared to the corresponding period in the preceding year.
In a similar vein, Mizuho Financial Group’s net income during the same period soared to ¥245.2 billion, presenting an impressive growth rate of approximately 54% from the previous year, as per the company’s filing. In contrast, analysts had estimated an average net income of ¥159.5 billion from the data provided by four experts.
Japanese financial institutions differ from their counterparts in the United States and elsewhere, as they are yet to experience interest rate hikes within their domestic market. For the time being, the central bank adheres to its negative interest rate policy, steered by the guidance of its new governor, Kazuo Ueda.
Nevertheless, optimism prevails in the nation’s banking stocks, with an underlying expectation of a potential policy pivot. Investors witnessed an extension of these positive developments after the Bank of Japan eased its control over bond yields, an action widely perceived as akin to policy tightening, which may ultimately boost the banks’ earnings. As a result, the Topix bank index has surged to an eight-year peak.
Net interest income at Sumitomo Mitsui experienced a moderate decline of 2.6%, settling at ¥420.5 billion, while Mizuho’s corresponding figure decreased by 14% to ¥217.6 billion, affecting Japan’s third-largest lender.
Despite an increase in the number of bankruptcies in Japan following the conclusion of the government’s pandemic relief, both Sumitomo Mitsui and Mizuho maintained their resilient positions during the first quarter, with bad loan costs remaining subdued.
The banks held steadfast to their annual profit projections previously established. Sumitomo Mitsui’s ambitious net income forecast of ¥820 billion for the fiscal year ending March 2024 could potentially be its most substantial achievement in the past decade. Simultaneously, Mizuho’s predicted net income of ¥610 billion may mark its most significant milestone in the last eight years.
Awaiting results from Japan’s largest lender, Mitsubishi UFJ Financial Group, scheduled for announcement on Tuesday, the financial landscape in the nation remains buoyant, exhibiting signs of resilience and growth.