By Anton Bridge
TOKYO (Reuters) -Japan’s second and third largest banking groups are on track to meet record high annual earnings forecasts as lending demand held up in the first quarter, despite uncertain global economic conditions.
The third-largest banking group, Mizuho Financial Group, upped its profit forecast by 15% to a record 1.02 trillion yen for this financial year on the strength of this quarter’s results and prospects for future growth.
Mitsui Sumitomo Financial Group, the second-largest banking group, kept its forecast at the 1.3 trillion yen it set in May, which would also be a record high.
The return of inflation to Japan has unleashed a wave of loan demand among its companies seeking funding for mergers and acquisitions (M&A) and capital expenditure, which remains strong despite U.S. tariff threats and market volatility.
Also on Thursday the Bank of Japan revised up its inflation forecasts and expressed a more optimistic stance on the economy than at its last meeting in May, raising the likelihood of further interest rate hikes.
SMFG recorded net profit of 376.9 billion yen ($2.53 billion) in the April-June quarter, up 1.5% from the year-earlier figure of 371.4 billion yen.
Mizuho had net profit of 290.5 billion yen ($1.95 billion) for the same period, 0.4% higher than 289.3 billion yen in the corresponding year-ago period.
Japan’s banks have cashed in on the end of ultra-low interest rates that hamstrung lending margins for years – Mizuho’s domestic loan and deposit rate margin grew to 1.07% from 0.92% at the end of March and 0.76% the year prior.
The prospect of sweeping tariffs unveiled by U.S. President Donald Trump’s in April did not hamper loan demand, particularly among large corporations.
SMFG’s net interest income grew to 626.3 billion yen versus 524.2 billion the previous year.
To account for the impact of tariffs, in May both SMFG and Mizuho had factored in a bottomline hit of about 100 billion yen and 110 billion yen respectively to their earnings forecasts for the current financial year.
Japan’s largest lender by assets, Mitsubishi UFJ Financial Group, will report results on Monday.
($1=148.7200 yen)
(Reporting by Anton Bridge; Editing by Himani Sarkar and Clarence Fernandez)
