Mizuho Financial Group Inc. (8411)’s third-quarter profit fell less than analysts estimated and the company raised dividends as gains on its stock investments helped to offset a drop in bond-trading income.
Net income at Japan’s third-largest bank by market value fell 36 percent from a year earlier to 133.4 billion yen ($1.3 billion) in the three months ended Dec. 31, figures derived from a nine-month earnings statement showed today. That beat the 104 billion-yen average estimate of seven analysts surveyed.
Mizuho joined Sumitomo Mitsui Financial Group Inc. (8316), the nation’s second-biggest lender, in posting a profit decline after trimming their Japanese government bond holdings as the central bank purchases the assets to defeat deflation. An economic recovery spurred lending and triggered a stock-market rally that boosted the value of banks’ shareholdings.
“Mizuho has become less reliant on JGBs,” said Naoko Nemoto, managing director of financial institutions ratings at Standard & Poor’s in Tokyo. “The key is whether demand for more profitable loans from small and midsized companies will increase. We hope banks will take more risk and expand loans.”
Income from trading government bonds and other securities fell 28 percent last quarter from a year earlier to 66.7 billion yen, according to calculations based on today’s statement. Tokyo-based Mizuho’s government bond holdings dropped 16 percent from March 2013 to 25.8 trillion yen at the end of December.
The bank raised its planned full-year dividend for the first time in six years to 6.5 yen from 6 yen, it said. Mizuho had a 61.1 billion-yen gain from equity-related investments in the nine months ended December, compared with a 107.5 billion-yen loss a year earlier, the statement showed.
Shares of Mizuho closed 0.9 percent higher at 219 yen in Tokyo before the earnings announcement. The benchmark Topix index fell 0.3 percent. The gauge jumped 51 percent last year on the back of Prime Minister Shinzo Abe’s efforts to stimulate the economy with fiscal spending and monetary easing.
Net interest income, a measure of lending profit, rose 3.1 percent to 277.8 billion yen, while fees and commissions gained 2 percent to 125.7 billion yen.
Mizuho’s earnings report came a week after Chief Executive Officer Yasuhiro Sato said he will step down as president of its banking unit following a probe into loans to gangsters. He vowed to stay on as group CEO. Regulators in December ordered Mizuho to suspend some consumer lending for a month after it failed to stop 200 million yen in borrowing by crime groups.
“I don’t think Sato’s resignation will have an impact on earnings or put Mizuho back into turmoil,” said SMBC Nikko’s Nakamura. “I can’t imagine what will happen if Sato gives up on his position at the holding company, though.”
Japan’s economic rebound has led to a drop in corporate bankruptcies, allowing banks to reduce cash set aside for bad debts. Mizuho had 74.6 billion yen of credit-related revenue in the nine months through December, compared with 32 billion yen in costs a year earlier, today’s statement showed.
Abe’s campaign to end two decades of economic stagnation got a boost from government reports today that showed inflation accelerated to 1.3 percent in December, industrial production gained and more jobs became available to applicants.
Loans at major banks climbed for a 13th month in December, according to Bank of Japan data. Corporate demand for credit is the highest since April 2011, a BOJ survey of loan officers showed last week. Still, profits on loans are constrained by interest rates kept low by the BOJ’s bond buying.
Sumitomo Mitsui’s third-quarter net income dropped 9.3 percent to 199 billion yen as bond trading and lending profit fell, overshadowing gains from stock holdings and fees, the bank reported on Jan. 29. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest bank, is scheduled to post earnings on Feb. 3.
The three so-called megabanks are expanding lending abroad in search of higher returns. Mizuho’s loans outstanding overseas rose to $145.8 billion as of December from $141.3 billion in September, according to today’s statement.
Mizuho, which lags behind Mitsubishi UFJ and Sumitomo Mitsui in Southeast Asian takeovers, is facing a deadlock in talks to buy a stake in PT Bank Pan Indonesia (PNBN), people familiar with the matter said last week.
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