Central bank's rate hike boosts profit margins! Mizuho (MFG.US) profit surges 62% in Q2, launches first-ever 10 billion yen share buyback plan in 16 years
1min read Driven by strong loan demand and higher margins following the Bank of Japan's July rate hike, Mitsubishi Financial (MFG.US) reported a 62% jump in second-quarter net profit and raised its annual guidance.
Data showed the group reported a net profit of ¥277bn for the July-September period, up from ¥170bn a year earlier. Half-year profits rose 36% to ¥5661bn.
Looking ahead, Japan's third-largest bank raised its full-year net profit forecast to a record ¥820bn ($5.26bn) from ¥750bn for the year to March 31.
Mizuho also announced a share buyback of up to ¥100bn, its first in 16 years, while raising its dividend forecast for the year by ¥15 to ¥130.
Chief executive Masahiro Kihara said: “We have entered a new phase of growth investment and enhanced shareholder returns.”
After seven years of negative rates that kept loan margins at rock-bottom levels, the market expected Japan's major banks to start benefiting from the Bank of Japan's rate hikes.
Following the end of negative rates in March, the BoJ raised its policy rate to 0.25% in July, driving a second consecutive quarter of higher margins on domestic lending at Mizuho.
Mizuho estimated the impact of the two rate hikes on its finances would total ¥85bn for the current fiscal year.
Meanwhile, a weaker yen boosted the value of overseas business, which has been a long-running theme for Japanese banks as they have expanded overseas. The yen's weakness also provided another tailwind.
Japanese banks have also benefited from the country's renewed push to unwind cross-shareholdings. The banks still hold stakes worth billions of dollars in corporate clients, which could be unwound to generate extra profits, especially as the Japanese stock market approaches record highs.