By Anton Bridge
TOKYO (Reuters) -Japan’s largest banks raised their annual profit forecasts and share buyback programmes after second quarter earnings as they cashed in on a long-awaited rise in interest rates and a wave of corporate activity fuelled by the end of deflation.
Mizuho Financial Group on Friday posted a 44% rise in net profit for July-September and raised its profit forecast to 1.13 trillion yen ($7.5 billion) from 1.02 trillion yen for the financial year to March 2026.
Larger rival Mitsubishi UFJ Financial Group logged a 7% increase in net profit over the period and hiked its annual forecast to 2.1 trillion yen from 2 trillion yen.
CORPORATE ACTIVITY CONTINUES
The results also demonstrated the banks’ success in weathering uncertain global economic conditions following U.S. President Donald Trump’s announcement of wide-ranging import tariffs in April.
As tariff-induced uncertainty waned, large Japanese firms, which make up the bulk of the banks’ corporate clients, continued mergers, acquisitions and capital spending, supporting loan demand.
MUFG’s loan balance for large domestic corporations rose to 26.8 trillion yen at the end of September from 25.6 trillion a year earlier.
Japan’s return to positive interest rates has also begun to feed into the banks’ profits.
Mizuho’s domestic loan and deposit rate margin over the six months to the end of September rose to 1.07% from 0.92% in the 2024 financial year and 0.76% in the year before that.
“There’s still a lot of uncertainty concerning tariffs. If for instance 15% tariffs are imposed on cars, the components and materials may be subject to different tariffs,” Mizuho Chief Executive Masahiro Kihara told a press briefing.
“But corporate actions have steadily returned,” Kihara said.
MUFG announced a 250 billion yen share buyback, bringing its total for this financial year to a record 500 billion yen, while Mizuho announced one of 200 billion yen, bringing its annual total to 300 billion yen.
During years of rock-bottom interest rates, Japan’s banks looked to expand beyond domestic lending, such as internationally or in areas such as wealth management.
MUFG owns about 24% of Morgan Stanley, which makes up over a quarter of its net income, while non-interest income in Mizuho’s global corporate and investment banking unit grew nearly 20% year-on-year in the six months to end-September.
“Since the negative interest rates period we have massively increased our revenue streams, including abroad,” Kihara said.
Both Mizuho and MUFG reported record profits in the year ended March 2025 and Friday’s forecasts exceed previous estimates, which themselves prefigured records.
MUFG, Japan’s largest lender, reported quarterly profit of 747 billion yen, while number three player Mizuho booked 399 billion yen.
Mitsui Sumitomo Financial Group, Japan’s second-largest banking group, also reports earnings on Friday.
($1 = 150.7800 yen)
(Reporting by Anton Bridge. Editing by Kate Mayberry and Mark Potter)
