The government made about 1 trillion yen in profit from the return of public funds by the three megabanks after Sumitomo Mitsui Financial Group Inc. on Tuesday joined two others in completing buybacks of shares held by the government.
By paying back the money, SMFG, Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. now have a free hand to manage their businesses and they are becoming increasingly aggressive, re-entering overseas markets, banking industry officials say.
The government provided some 6.65 trillion yen in public funds to the three megabanking groups in 1998 and 1999 to stabilize the country’s financial system and help banks dig out from under a pile of bad loans.
As their health has recovered, the banks have placed priority on repaying the funds by buying back shares issued to the government.
Because the prices of those shares have risen, the government has made a total profit of about 1 trillion yen.
MUFG returned 2.2 trillion yen in public funds in June, resulting in a 460 billion yen profit for the government. Mizuho finished its buyback in July, returning 2.95 trillion yen, including a 100 billion yen capital gain. And SMFG’s return of 1.501 trillion yen netted the government a profit of 440 billion yen.
The three megabanks have used operating profits primarily to return the money, while cutting labor costs and slashing overseas operations.
This “backward looking” strategy has had a cost: the loss of skilled employees and constraints on the banks’ ability to expand loans to individuals.
But having paid back the bailout money, banks are now poised to take a more aggressive stance.
MUFG has taken a stake in a Chinese bank, the first Japanese bank to do so, with an eye toward making loans to individuals in China. Mizuho has meanwhile restructured its domestic branch network in a bid to promote lending to individuals.
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