Top Japanese Banks Forecast Good Income Domestic And Abroad

The top three Japanese banks said on Monday that they expect good lending income at home and abroad to enhance net profits this fiscal year, with the largest lender, Mitsubishi UFJ Financial Group Inc (MUFG), anticipating a record annual profit.

MUFG expects a 16% increase in net profit to 1.3 trillion yen ($9.63 billion) for the fiscal year ending March 2024, surpassing a previous record established two years ago and exceeding the 1.18 trillion yen average of 14 analysts' projections compiled by Refinitiv.

Sumitomo Mitsui Financial Group Inc (SMFG) and Mizuho Financial Group Inc (MFG), Japan's second- and third-largest lenders by assets, are likewise anticipating their greatest net earnings since the mid-2010s.

Higher interest rates in the United States are pushing Japanese banks' net interest margins, or the difference between income made on loans and interest given to depositors, while a slight recovery in Japan is increasing demand for loans, the banks said.

"Our main scenario for Japan is that solid consumer consumption and inbound tourism will continue to support a mild economic recovery," said Hironori Kamezawa, Chief Executive Officer of MUFG.

However, in separate press conferences, the bank's CEOs all expressed concern about heightened credit risks arising from global banking upheaval, which was started by the failure of Silicon Valley Bank, despite the fact that Japanese banks had been unaffected.

"We have booked higher loan loss provisions for rate-sensitive businesses such as leveraged lending and commercial real estate (in the United States)," Sumitomo Mitsui Financial Group Inc (SMFG) CEO Jun Ohta said.

SMFG aims to set aside 230 billion yen to cover probable loan losses this fiscal year, up from 210 billion yen the previous year.

Mizuho anticipates rising credit charges as well.