Mizuho Financial Group Inc. raised its full-year profit forecast after first-half results were buoyed by gains in investment banking and trading, along with a cheaper yen.
Japan’s third-largest lender now expects net income of 640 billion yen ($4.2 billion) for the year ending March 31, which would be the highest in eight years. That compares with the average analyst estimate of 634 billion yen and Mizuho’s previous forecast of 610 billion yen.
Chief Executive Officer Masahiro Kihara said earnings in the fiscal first half were helped by overseas business including trading and managing initial public offerings, as well as advice on mergers and acquisitions at home.
Mizuho has been pushing into investment banking in the US with a deal this year to buy Greenhill & Co. to scale up its dealmaking heft. The Japanese bank has entered the top 10 among equity underwriters in the US, working on transactions including Arm Holdings Plc’s IPO, according to data compiled by Bloomberg.
The Greenhill acquisition will boost M&A business in the US and elsewhere, Kihara told reporters in Tokyo on Monday.
Kihara said one downside risk in the second half is a potential strengthening of the yen. Mizuho and other Japanese companies that earn money abroad have benefited from the depreciation of the currency, which has dropped about 25% against the dollar in the past two years.
At home, Mizuho is among lenders that are expected to benefit from a potential end to the Bank of Japan’s negative interest-rate policy, which has squeezed lending profitability since its introduction in 2016. Japanese bank shares have jumped this year on speculation that the central bank will soon scrap the program as inflation emerges in the world’s third-largest economy.
The Bank of Japan has already been loosening its grip on bond yields, but Kihara said such adjustments will have less impact on earnings than changes to short-term policy rates. A 10 basis-point increase in those rates would boost Mizuho’s interest income by 50 billion yen, it said in a presentation.
Shares of Mizuho closed 1.3% higher before the results, taking this year’s gain to 34%.
Net income totaled 170.6 billion yen for the three months ended Sept. 30, down 2.4% from a year earlier, according to Bloomberg calculations based on six-month figures released by the company. Mizuho earned 68% of its original annual profit target in the first half, helped by smaller bad-loan costs.
The bank kept a lid on soured loans as Japanese clients largely coped with the rise in prices. It reported 11 billion yen in credit costs for the first half, way short of its annual projection of 100 billion yen.
Bigger rivals Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are scheduled to release their results on Tuesday.
(Updates with comments from CEO throughout)
