Japan's three megabanks revised upward their fiscal full-year net income estimates as they benefit from higher interest rates at home and unwind cross-share holdings.
Mitsubishi UFJ Financial Group Inc. said it set a new net income target of ￥1.75 trillion for the year to March 2025, up from the previously estimated ￥1.5 trillion. Sumitomo Mitsui Financial Group Inc.. expects ￥1.16 trillion in net income for the same fiscal year, rising from its earlier projections of ￥1.06 trillion, and Mizuho Financial Group Inc. aims for ￥820 billion in earnings, up from its previous goal of ￥750 billion, according to their earnings statements released Nov. 14.
"The Japanese economy is moving toward regrowth," Toru Nakashima, SMFG's CEO, said at an earnings press conference Nov. 14. "Interest rates are rising and this is becoming a significant tailwind for us."
The three megabanks will likely widen their lending margins as the Bank of Japan has entered a rate hike cycle. The BOJ is expected to consider another rate hike in December after it raised rates twice this year, according to economists. The banks also seek to improve capital efficiency by unraveling strategically held shares of other businesses amid growing investor demand.
"The [BOJ's] gradual monetary policy normalization will continue," MUFG CEO Hironori Kamezawa said during a separate earnings press conference on the same day. The CEO expects another 25-basis-point rise in its policy rates to contribute ￥100 billion to the bank.
MUFG's net income for the fiscal first half increased 35.6% from a year earlier to ￥1.236 trillion, while SMFG's earnings rose 37.7% to ￥725.2 billion. Mizuho posted a 36.1% gain in net income to ￥566.1 billion.
On the back of Japan's higher rates, MUFG boosted its net interest income 22.6% year over year to ￥1.508 trillion for the April-to-September period, while SMFG's net interest income increased by 26.8% to ￥1.126 trillion.
MUFG reduced ￥170 billion worth of strategic shares in other businesses for the same six months. The bank aims to unwind ￥700 billion of cross-shareholdings by the fiscal year ending in March 2027. SMFG, which offloaded ￥82 billion worth of such shares in the fiscal first half, aims to dispose of ￥600 billion over the next five years.
Mizuho, which sold off ￥119 billion in strategic shares from March 2023 to September 2024, plans to unwind cross-shareholdings of ￥300 billion by March 2026.
