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Income weakens at Japanese megabanks in fiscal Q4 amid deepening challenges

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Income weakens at Japanese megabanks in fiscal Q4 amid deepening challenges

Amid challenges such as impairment losses and an ultralow interest rate environment, Japan's three largest banking groups reported largely weaker earnings for the quarter ended March 31.

Mitsubishi UFJ Financial Group Inc. reported a sharp decline in fiscal fourth-quarter net income to ¥457 million from ¥126.24 billion recorded a year ago, while Mizuho Financial Group Inc. swung to a net loss of ¥313.36 billion from net income of ¥100.84 billion. Sumitomo Mitsui Financial Group Inc. was the only one of the three to report a year-over-year increase in net income, edging up to ¥88.80 billion from ¥86.24 billion.

Mizuho booked ¥503.61 billion in impairments on fixed assets for the fiscal year ended March 31. In March, the company had warned of about ¥680 billion in losses due to impairment losses on fixed assets and a restructuring of its securities portfolio.

Meanwhile, Mitsubishi UFJ Financial also booked about ¥100 billion in write-downs and other charges for the year, primarily due to its credit card business.

Margins at the megabanks remained under pressure, with only Sumitomo Mitsui Financial reporting that its net interest margin was unchanged as of the prior fiscal-year end at 0.78%. Mitsubishi UFJ's NIM declined to 0.71% from 0.72%, while Mizuho posted a fall to 0.39% from 0.47%.

Looking ahead, the three megabanks will likely continue to face a myriad of challenges in the fiscal year ending March 2020. Moody's said May 16 that credit costs are expected to rise over next few years as the megabanks turn to riskier, higher-margin overseas loans as a source of growth amid tepid domestic loan demand.

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As of May 22, US$1 was equivalent to ¥110.35.

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See a section dedicated to financial highlights for a bank by searching for the company in the search box and going to the "Financial Highlights" section, housed under "Templated Financials" on the left-hand panel. Here is an example for Mizuho Financial Group.
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