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Mitsubishi UFJ, Mizuho bump up profit goals

Bloomberg

Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. raised their full-year profit goals after the economic revival spurred lending and an equity rally boosted fees and the value of their shareholdings.

Net income at Mitsubishi UFJ will probably total ¥910 billion in the year ending in March, the nation’s biggest bank said in a statement Thursday, raising its target 20 percent.

Mizuho, the third-biggest lender by market value, increased its forecast 20 percent to ¥600 billion, even as it grapples with a probe into loans to crime groups.

They join Sumitomo Mitsui Financial Group Inc., which upgraded its earnings projection Tuesday amid an equity rebound that peaked in May on expectations for Prime Minister Shinzo Abe’s policies to stimulate growth.

The economy expanded for a fourth quarter, government figures showed Thursday, and loans at major banks have climbed for 11 straight months.

“The ‘Abenomics’-driven recovery associated with a cheaper yen and higher stock prices had a positive impact on banks’ first-half earnings,” Akira Takai, an analyst at Daiwa Securities Group Inc., said before the reports. “Losses from shareholdings, which were a drag a year earlier, turned around and the gains contributed to profits.”

Net income at Mitsubishi UFJ rose 83 percent to ¥530.2 billion in the six months that ended in September from a year earlier, the company said Thursday. That beat the ¥466 billion average estimate of six analysts surveyed. The full-year target is bigger than the ¥836.9 billion estimated by analysts.

At Mizuho, net income more than doubled to ¥429.7 billion in the six months, beating the average of ¥379 billion projected by analysts.

Sumitomo Mitsui, Japan’s second-biggest bank by market value, earlier this week reported a record six-month profit of ¥505.7 billion and raised its full-year forecast 29 percent to ¥750 billion.

Abe’s campaign to end deflation with fiscal spending and monetary easing has fueled the rally, spurring banks’ sales of mutual funds and increasing the value of their stakes in other companies.

Mitsubishi UFJ’s fees and commissions surged 20 percent in the six months from a year earlier to ¥564.7 billion. It had a ¥43.4 billion gain from equity-related investments, compared with a ¥173.6 billion loss a year earlier.

Mizuho said income from fees and commissions rose 28 percent to ¥275.4 billion, while it posted a ¥39 billion gain from equity-related investments, compared with a loss of ¥227.6 billion a year earlier.

The economy grew at an annual 1.9 percent rate in the three months to Sept. 30, the fourth quarter of expansion, the Cabinet Office reported Thursday. While that represented a second straight period of slowdown, economy minister Akira Amari said he expects a moderate pace of consumption growth ahead and a solid export recovery.

Loans at major banks increased 1.7 percent in October, the 11th consecutive advance, Bank of Japan data show. That is helping to offset the lowest loan profitability in Asia as asset purchases by the BOJ depress interest rates. Net interest margins at the three biggest banks average 0.99 percent, data compiled by Bloomberg show.

Mitsubishi UFJ’s first-half lending income climbed 3.7 percent to ¥908.7 billion. Mizuho’s rose 0.2 percent to ¥534 billion.

Mizuho has been roiled by revelations that it failed to cancel loans made to gangsters through a consumer credit affiliate and then misinformed the Financial Services Agency about how much its top executives knew about the transactions.

Mizuho President Yasuhiro Sato, who has taken pay cuts over the matter as his bank vowed to improve compliance, apologized in the Diet on Wednesday.

“We will do our best to see that the loan issue won’t have a big impact on our fiscal-year plan,” Sato said at a briefing on the earnings Thursday. “I think the ¥600 billion forecast is definitely achievable.”

The FSA broadened its probe this month by beginning inspections of Mitsubishi UFJ and Sumitomo Mitsui and re-examining Mizuho. Sumitomo Mitsui’s lending unit chief, Takeshi Kunibe, told lawmakers Wednesday that there have been cases where borrowers at his bank were later found to have gang ties.

“Mizuho’s crime-loan scandal won’t have any impact on earnings, although it may hurt the bank’s reputation,” said Yoshinobu Yamada, an analyst at Deutsche Bank AG. “It’s turning into a problem for the whole banking sector, rather than just Mizuho.”