- Results released hours after BOJ announced negative rates
- Charging banks for deposits at central bank may hurt earnings
Mizuho Financial Group Inc.’s third-quarter profit fell 19 percent as declines in bond trading and lending income overshadowed gains from sales of shareholdings.
Net income dropped to 135.3 billion yen ($1.1 billion) in the three months ended Dec. 31 from 167.9 billion yen a year earlier, figures derived from a nine-month earnings statement showed Friday. That compared with the 137 billion yen average estimate of four analysts surveyed by Bloomberg.
The results came hours after the Bank of Japan said it will start charging lenders for some of their deposits held at the central bank, a move that could crimp earnings that are already squeezed by record-low interest rates. Mizuho and its peers are also facing headwinds from the recent global market turmoil that risks damping fee business and gains from shareholdings they pledged to sell as part of a corporate governance overhaul.
Shares of Tokyo-based Mizuho dropped as much as 5.2 percent following the BOJ’s announcement before closing 1.7 percent lower, compared with a 2 percent drop in the Topix Banks Index. The benchmark Topix jumped 2.9 percent as the central bank’s move toward negative interest rates weakened the yen.
Nine-month profit fell 0.7 percent to 519.5 billion yen, representing 82 percent progress toward Mizuho’s full-year forecast of 630 billion yen.
Lenders’ cash at the central bank will be subject to a three-tiered rate system, whereby the BOJ will continue to pay 0.1 percent on existing deposits, offer zero interest on required reserves and charge 0.1 percent on additional deposits. BOJ Governor Haruhiko Kuroda’s policy board said the system will minimize any impact on lenders’ earnings and beating deflation will benefit them in the long run.
Net interest income, or revenue from lending minus payments on deposits, fell 17 percent last quarter from a year earlier, Mizuho’s results showed. Profit from trading government bonds and other securities dropped 64 percent. Income from fees and commissions decreased 5 percent. Credit-related costs shrank to 13.2 billion yen from 44.3 billion yen a year earlier.
The bank posted 69.2 billion yen in gains on the sale of stock holdings as it trimmed investments in its corporate clients. Mizuho has exited stakes in companies including Credit Saison Co. since announcing targets for reducing holdings of shares in its customers as part of government efforts to make firms more responsive to investors.
“Mizuho made good progress in selling its cross-shareholdings,” Toyoki Sameshima, a Tokyo-based senior analyst at BNP Paribas SA, said before the results were announced. “In the fourth quarter we’ll need to watch how the global market rout has affected securities subsidiaries and the impact of the drop in energy prices.”
The nation’s largest banks may offload 5.6 trillion yen of shares by March 2019, with Mizuho projected to sell 2 trillion yen, according to estimates by Bloomberg Intelligence analyst Francis Chan.