Japan’S Megabanks Forecast Record Profits Amid Rising Rates


(MENAFN- The Rio Times) Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG), and Mizuho Financial Group all forecast record profit
s for the fiscal year starting in April.

This comes after Japan's central bank
ended its negative interest rate policy.

MUFG, Japan's largest lender, expects a net income of ¥1.5 trillion ($9.6 billion), a 0.7% increase from the previous year.

SMFG aims for a 10% increase to ¥1.06 trillion ($6.8 billion), while Mizuho expects profit
s to rise 10.5% to ¥750 billion ($5.0 billion).

Collectively, the three bank
s made ¥3.1 trillion ($20 billion) in net profit
last fiscal year. They anticipate this will rise to ¥3.3 trillion ($21.2 billion) this year.



SMFG's net income surged more than fourfold to ¥170 billion ($1.1 billion) in the fiscal fourth quarter.

Strong loan demand drove this growth. Mizuho's fourth-quarter net income more than tripled to ¥36.7 billion ($236 million). The end of negative rates significantly boosted profit
s.

SMFG's net interest income increased by ¥40 billion ($256 million) and Mizuho's by ¥45 billion ($288 million).

All three bank
s plan significant share buybacks. MUFG and SMFG will each buy back about ¥100 billion ($640 million) of their own shares.

SMFG also plans to raise its dividend by ¥60 to ¥330 per share. Mizuho will not do a share buyback until it builds sufficient capital reserves.

Japan 's mega bank
s benefit from low funding costs as deposit rates remain near zero. This makes it easier to profit
as interest rates rise.

Overseas business also drives profit
s. Japanese bank
s hold $5.65 trillion in cross-border claims. Overseas loans make up 40% of MUFG's loan portfolio, 36% at SMFG, and 39% at Mizuho.

"The results were helped by a very favorable business environment," said Toru Nakashima, CEO of SMFG.
Japanese Banks Navigate Challenges and Opportunities
Rising interest rates and increased investments by Japanese companies in clean technologies and digitization supported strong performance. The bank
s' share prices have risen by about 30% this year.

Analysts attribute the bank
s' success to their large balancesheet
s. "As interest rates go up, having a large balancesheet
has become an asset," said Nana Otsuki, professor at NUCB Business School.

However, risks remain. A further decline in the yen could aggravate inflation, leading consumers to tighten their spending.

Business school professor Otsuki urged caution. She warned the bank
s' CEOs against increasing risks too much.

Despite challenges, the bank
chiefs remain optimistic. "They are eager to invest in dealing with challenges such as climate change, digitization, and corporate governance," said Nakashima.

MUFG's CEO, Hironori Kamezawa, highlighted opportunities in climate transition financing, M&A financing, and managing assets against inflation.

The outlook for Japan's bank
ing sector appears strong. Rising interest rates and strategic investments drive growth. Careful management will be crucial to navigating potential economic headwinds.

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The Rio Times

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