Mitsubishi UFJ Financial Group Inc. probably led a slight increase in first-quarter profit at Japan’s biggest banks as gains in fee income and overseas lending made up for shrinking loan profitability at home.

Combined net income at Mitsubishi UFJ, Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. rose 1 percent to ¥632.1 billion ($5.1 billion) in the three months to June, according to the average estimate of six analysts surveyed by Bloomberg before earnings reports due Friday.

The Tokyo-based banks have announced acquisitions abroad worth about $6 billion this year as low interest rates in Japan continue to squeeze margins. They are also stepping up domestic sales of investment products as people begin shifting some of their savings to riskier assets amid a stock market rally.

“The banks have made a solid start to the year,” said Toyoki Sameshima, a senior analyst at BNP Paribas SA in Tokyo. “Downward pressure remains on loan spreads, but the banks have performed well with investment trust sales and corporate fees and commissions,” he said, adding that the pace of growth in overseas lending enjoyed in recent years will cool.

Net income at Mitsubishi UFJ, Japan’s biggest bank, increased 5.5 percent from a year earlier to ¥253.8 billion, according to the analysts. Sumitomo Mitsui’s first-quarter profit slipped 4.4 percent to ¥220.6 billion and Mizuho’s climbed 1.9 percent to ¥157.7 billion, the projections show.

If the banks meet the analysts’ estimates, they will start the fiscal year in line with their own full-year targets. Mitsubishi UFJ, which earned a record ¥1.03 trillion last year, is seeking annual net income of ¥950 billion. Sumitomo Mitsui and Mizuho forecast profit to rise to ¥760 billion and ¥630 billion, respectively.

Prime Minister Shinzo Abe’s efforts to stimulate the economy through monetary easing helped to spur bank lending while also lowering borrowing costs. Loans at city banks have risen for 2½ years, according to the Bank of Japan. The average interest rate on new loans was 0.801 percent in May, close to a record-low 0.767 percent last August, BOJ data show.

“While domestic lending grew in the first quarter, tighter loan spreads will constrain profit growth,” Yasuhiro Sato, chairman of the Japanese Bankers Association, said at a news briefing on July 16. He expects overseas lending to keep expanding and doesn’t see any change in the direction of interest margins yet.

Sato is also chief executive officer of Mizuho, which said this year that it’s buying North American loans from Royal Bank of Scotland Group PLC for $3.5 billion. Sumitomo Mitsui last month agreed to purchase General Electric Co.’s European buyout-lending unit for about $2.2 billion. Mitsubishi UFJ’s main lending arm is considering acquiring a bank in Indonesia, the Philippines or India, Asia-Pacific CEO Go Watanabe said in an interview last month.

Shares of Mitsubishi UFJ were little changed at 10:36 a.m. on Monday in Tokyo, while Sumitomo Mitsui fell 1.1 percent and Mizuho slid 0.6 percent. The three banks have jumped at least 23 percent this year, more than the benchmark Topix index’s 17 percent advance.

Prime Minister Abe is also pushing companies to improve governance, prompting Mizuho and Sumitomo Mitsui to pledge to reduce their shares in client companies that were traditionally held to cement ties. Mitsubishi UFJ is yet to release its policy for dealing with cross-shareholdings.

Japan’s Financial Services Agency said in a July report that banks can’t ignore the risk to their capital levels if share prices fall. At the same time, the Topix index’s rise to an almost eight-year high gives banks an opportunity to realize gains by selling equities.

Rie Nishihara, an analyst at Mizuho’s securities unit, estimates the market value of shareholdings at the three mega-banks was ¥14 trillion at the end of March, double the book value of ¥7 trillion.

Mizuho may have made 25 percent of its planned share sales for the fiscal year in the first quarter, according to a research note by Yoshinobu Yamada, a senior analyst at Deutsche Bank AG in Tokyo. Mitsubishi UFJ and Sumitomo Mitsui will probably ramp up disposals from the second quarter, he said.

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