Japan's SMFG, Mizuho post surge in first-half profit as credit costs
ease
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[November 12, 2021] TOKYO
(Reuters) -Two of Japan's megabanks, Sumitomo Mitsui Financial Group Inc
(SMFG) and Mizuho Financial Group Inc, on Friday reported a surge in
first-half profit as the economy ravaged by the COVID-19 pandemic
recovered and credit costs abated.
SMFG, Japan's second-largest bank by assets, said net profit jumped 69%
to 456 billion yen ($4 billion) in the April-September period. Mizuho,
the No. 3 lender, said earnings rose 79% to 385.7 billion yen. Both
banks lifted full-year profit forecasts.
As the COVID-19 crisis hammered the economy, lenders have been proactive
in setting aside bad loan reserves, but intervention from the government
has capped those losses, said S&P Global Ratings senior director Ryoji
Yoshizawa.
"Most of the banks have not recorded a large amount of credit costs
thanks to the huge government support provided to corporate sectors," he
said.
Going forward, overseas lending margins may be squeezed as the Federal
Reserve starts to taper its financial easing, while sluggish recoveries
in Southeast Asia could add to credit costs in those markets, he added.
SMFG estimates credit-related costs will total 300 billion yen for the
full financial year. For the first six months, it booked 26.7 billion
yen in such costs. Mizuho is expecting 100 billion yen in credit costs
for the year, and recorded 49.6 billion yen in the first half.
![](http://archives.lincolndailynews.com/2021/Nov/12/images/ads/current/topflight_sda_SFARM_2020.png)
Japanese banks have been struggling with years of ultra-low interest
rates and a shrinking population. SMFG is looking overseas for growth
opportunities.
In July, the company announced plans to buy a controlling stake in
Fullerton India for $2 billion and to purchase nearly 5% of Jefferies
Financial Group Inc shares for $386 million.
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![](../images/111221PIX/2021-11-12T085711Z_2_LYNXMPEHAB0D3_RTROPTP_4_MIZUHO-RESULTS_small.JPG)
Mizuho Bank's signboard is pictured in Tokyo, Japan, January 25,
2017. Picture taken January 25, 2017. REUTERS/Kim Kyung-Hoon
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Moody's Japan Senior Credit Analyst Tetsuya Yamamoto said SMFG's profitability
is likely to improve due to "lower credit costs, higher profits from its
aircraft leasing business and overseas operations in Asia, and additional cost
reductions."
SMFG also announced it would spend up to 100 billion yen to buy back and retire
outstanding shares.
Mizuho has been plagued this year by a series of system glitches in its ATM
network. Chief Executive Officer Tatsufumi Sakai started his earnings
presentation by apologising for the trouble.
Amidst a number of earnings on Friday, a takeover drama over smaller lender
Shinsei Bank Ltd escalated.
SBI Holdings Inc. said it would consider taking a majority stake in Shinsei if
it succeeds in its $1.1 billion tender offer to raise its stake in the lender to
48% from about 20%.
However, SBI will retract its offer if Shinsei pursues a poison pill defence, it
said.
Adding to the fray, a regulatory filing showed that City Index Eleventh, a fund
backed by activist investor Yoshiaki Murakami, held 5.29% of Shinsei.
($1 = 114.0700 yen)
(Reporting by Rocky Swift and Makiko Yamazaki; Editing by Jacqueline Wong and
Christian Schmollinger)
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