While net interest income and margins continued falling at all three Japanese megabanks in the fiscal first quarter, Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. posted higher net profits while Sumitomo Mitsui Financial Group Inc. logged a decline in earnings.
In the three months ended June 30, Mitsubishi UFJ led the pack and reported a 24.1% year-over-year growth in net profit to ¥391.07 billion on higher net trading income, unrealized gains on the bonds it held and other nonrecurring gains, despite a 7.5% year-over-year fall in net interest income.
Mizuho, whose net interest income fell 7.9%, posted a net profit of ¥162.44 billion, up 0.8% from the prior-year period as gains in net fee and trading income were largely offset by lower net gains related to stocks.
Sumitomo Mitsui Financial, meanwhile, said its net profit dropped 5% year over year to ¥215.73 billion, due to weak performance in the wealth management business and lower wholesale noninterest income. Its net interest income fell 9.3% from a year earlier.
Net interest margins remained under pressure. Mitsubishi UFJ's NIM declined to 0.67% from 0.74% a year earlier, Mizuho's margin fell to 0.42% from 0.44% and Sumitomo Mitsui Financial's margin dropped to 0.69% from 0.79%.
Japanese banks' lending business will likely continue to be hit by an aging and shrinking population and chronically low interest rates. Haruhiko Kuroda, Bank of Japan governor, said in late June that the central bank would further ease monetary conditions if the global slowdown hits domestic economy, and that the bank would maintain interest rates at "current extremely low" levels at least through spring 2020.
Meanwhile, megabanks reported deteriorated loan quality in the fiscal first quarter. Nonperforming loan ratio at Mizuho Financial rose to 0.85% as of June 30 from 0.71% recorded a year ago, while Sumitomo Mitsui Financial's NPL ratio worsened to 0.93% from 0.85%.
As of Aug. 5, US$1 was equivalent to ¥106.13.