Japanese banks have been hamstrung by rock-bottom interest rates and chronic weakness in the world's second-largest economy. They are also hurt by an inability to expand their businesses beyond lending. Mizuho, the worst-capitalised of Japan's three major banks, is expected to follow rivals Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group and announce a massive capital raising to meet stricter global regulations.
"The real issue behind Mizuho is capital," Ismael Pili, a bank analyst at Macquarie Capital Securities in Tokyo, said on Friday. "When you are in this capital-preservation mode, you are going to try and slow down your asset growth, which means you are going to curtail your lending activity, you may even try to slow down your sales activity."
Smaller lenders Resona Holdings and Aozora Bank, which also reported third-quarter results on Friday, also benefited from a decrease in bad loans. Unlike Mizuho, both mid-sized banks lifted their full-year forecasts. Mizuho reported a group net profit of 38.5 billion yen ($428 million) for the October-December quarter, compared with a net loss of 145 billion yen a year earlier, when it was clobbered by losses on its massive stock holdings and a spike in bad loans. The results were announced after the market's close.
Reuters calculated the third-quarter figure by subtracting the bank's first-half results from the nine-month numbers released on Friday. Mizuho stuck to its forecast for a full-year profit of 200 billion yen. That compares with an average estimate of 178 billion yen of 12 analysts by Thomson Reuters I/B/E/S. Starmine SmartEstimate shows a downside surprise of 3.6 percent.