Strong loan demand boosts Q2 earnings in Japan Sumitomo Mitsui, Mizuho

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TOKYO, Nov 14 (Reuters) – Sumitomo Mitsui Financial Group Inc (8316.T) and Mizuho Financial Group (8411.T) reported strong second-quarter earnings on Monday on demand from overseas clients seeking loans before interest rates rose.

Sumitomo Mitsui, Japan’s second-largest bank by assets, raised its net profit forecast for the full year through March by 5% to 770 billion yen ($5.51 billion). ) after posting an 8% increase in profits for July-September.

“Expectations of higher interest rates have prompted foreign customers, mainly in the United States, to block their loans,” Sumitomo Mitsui CEO Jun Ohta said at a press briefing. Lending in Japan has also been buoyant, with companies making new investments as part of their post-pandemic business strategies, he added.

Smaller rival Mizuho reported a 29% increase in quarterly net profit, also citing growth in overseas loans.

Meanwhile, second-quarter net profit fell 70.5% to 117.41 billion yen at Japan’s biggest lender Mitsubishi UFJ Financial Group Inc. (8306.T) due to an exceptional accounting loss linked to the sale this year of the American unit MUFG Union Bank.

But Mitsubishi UFJ, which owns about 22% of Morgan Stanley (MS.N)also saw healthy growth in overseas lending.

Both Mitsubishi UFJ and Mizuho maintained their full-year earnings outlook.

Mitsubishi UFJ and Sumitomo Mitsui announced share buybacks worth up to 150 billion yen and 200 billion yen, respectively.

However, officials from the three major lenders all issued a note of caution on their earnings outlook.

“In Japan, we would take loan loss provisions prospectively for industries that cannot pass on rising costs to prices,” Mizuho CEO Masahiro Kihara said. “And overseas, particular caution is needed, as higher interest rates would drain cash flow from some businesses,” he added.

Rising U.S. interest rates have also hit banks’ holdings of foreign bonds, primarily U.S. Treasuries, hard, in which they have invested heavily in search of higher yields amid ultra-low rates at home. .

The combined valuation losses on those holdings in the three banks stood at 3.972 billion yen at the end of September, an increase from 2.656 billion yen at the end of June.

But the banks all said a large portion of their positions had been hedged and the losses were manageable. “We have already significantly reduced our positions,” said Mitsubishi UFJ CEO Hironori Kamezawa.

($1 = 139.7200 yen)

Reporting by Makiko Yamazaki; Editing by David Dolan, Simon Cameron-Moore and Emelia Sithole-Matarise

Our standards: The Thomson Reuters Trust Principles.

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