Japan’s three megabanks look set to beat earnings estimates as higher interest rates and strong loan demand boost their full-year results.
The lenders — Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. — have already exceeded, or are close to exceeding, these estimates just nine months into the financial year, the banks said in earnings results.
Mizuho leads, having exceeded its annual earnings target of ￥820 billion by 4% in the nine months from April to December. Mitsubishi UFJ Financial Group (MUFG), meanwhile, hit 99% of its net income target of ￥1.75 trillion for the fiscal year, while Sumitomo Mitsui Financial Group (SMFG) fell just 2% shy of its ￥1.13 trillion earnings goal. The fiscal year in Japan runs from April to March.
"There seems to be no major risk in the fourth quarter," said Toyoki Sameshima, a senior analyst at SBI Securities Co. "There is no doubt they would beat their full-year earnings estimates."
The Bank of Japan raised its short-term policy rate to 0.50% from 0.25% in January, marking the third hike since it moved away from negative interest rates in March 2024 and is the highest level since 2008. Economists expect the Bank of Japan to hold to this monetary policy position, potentially raising the rate to 1.0% or more over roughly the next year, depending on wage increases and inflation.
Another key factor was loan growth. Major Japanese banks, including the megabanks, increased their lending by 3.1% in December from a year earlier, Bank of Japan data shows. This was up from growth of 2.9% in November and 2.6% in October, the data shows.
The megabanks reported robust loan growth — MUFG's outstanding loans in and outside Japan increased 6% from a year earlier to ¥125.6 trillion in December 2024, while SMFG's global outstanding lending grew about 9.3% to ¥106.7 trillion and Mizuho increased overall loans 6.5% to ¥97 trillion in the same period.
MUFG estimates that the January rate hike will add ¥20 billion in net interest income for the current fiscal year through March 2025, and ¥100 billion annually beyond that. SMFG also expects the rate increase to add ¥100 billion in net interest income annually, on top of a total ¥100 billion addition from the July and March hikes. The lender says a 25-basis point rate increase will generate an additional ¥100 billion.
Mizuho said the three rate hikes led to it earning ¥105 billion in net interest income for the fiscal year ending in March, and estimates this will more than double to ¥225 billion in the next fiscal year. It expects an additional ¥120 billion annually from a 25 basis-point rate hike.
MUFG said Feb. 4 that it posed a 35% increase in net income to ￥1.29 trillion in the nine months to December versus the prior-year period, while SMFG reported Jan. 29 that its net income surged 43% to ￥1.136 trillion in the same period. Mizuho’s earnings jumped 33% to ￥855.3 billion, according to its Feb. 3 statement.
Even so, the megabanks all maintained their full-year net income outlook without upwards revisions. An SMFG spokesperson cited a planned sale of its unspecified loss-making overseas assets in the fourth quarter and concerns about higher inflation outside Japan as a reason for this, while Mizuho and MUFG spokespeople did not elaborate on this in their earnings results.
