Mizuho Returns to Profit as Bad Loans Decline in Japan, Bond Trading Rise
Mizuho Financial Group Inc., Japan’s second-largest publicly traded bank by assets, turned to a first-quarter profit as bad-loan charges fell and income from bond trading increased.
Net income was 149.8 billion yen ($1.7 billion) for the three months ended June 30, compared with a loss of 4.5 billion yen a year earlier, the Tokyo-based bank said today. That beat the 126 billion yen average estimate of four analysts surveyed by Bloomberg.
Bad-loan costs dropped 95 percent last quarter from a year earlier, as corporate bankruptcies in Japan declined for 11 straight months through June. Tokyo-based Mizuho, which lost more than $8 billion on investments related to the U.S. mortgage crisis, is cutting expenses and seeking growth in Asia to catch up with rival Mitsubishi UFJ Financial Group Inc.
“Bad loan costs at big banks should in general be lower this year than last, helping lenders to boost profit,” Graeme Knowd, a Tokyo-based analyst at Morgan Stanley MUFG Securities Co., said before today’s announcement. “Mizuho has room to restructure and lower costs.”
Japan’s economy, the world’s second-largest, expanded at an annualized rate of 5 percent rate in the three months ended March 31, driven by exports to Asia and higher consumer spending. Sentiment among Japan’s largest manufacturers rose to a two-year high in June, according to data from the Bank of Japan this month, signaling the European debt crisis has yet to undermine their confidence in a global recovery.
Bond Trading
The bank’s shares have fallen 15 percent since the start of the year and declined 1.4 percent to 141 yen before the earnings announcement.
Mizuho, which maintained its full-year profit forecast of 430 billion yen, said in May it will cut expenses by consolidating management functions and information systems to help reach its fiscal 2012 net income target of 500 billion yen. The bank will focus on boosting profit from its Asian operations outside of Japan and large-customer loans and investment banking.
Bad-loan costs at Mizuho fell to 3.7 billion yen in the first quarter from 76 billion yen a year earlier. Income from bond trading rose to 65.4 billion yen in the quarter from 8.9 billion a year earlier.
In the year-ago quarter, Mizuho booked a loss of 87.9 billion yen on transactions to hedge loans and equity holdings.
To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net;
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