Mizuho Financial Group, Japan’s second- biggest lender by assets, forecast net income will decline 11% to a four-year low as the central bank’s negative interest-rate policy squeezes loan profitability.
Net income will decrease to ¥600bn ($5.5bn) in the year ending March, the company said in a statement on Friday. While Sumitomo Mitsui Financial Group said profit will rise 8.2% to ¥700bn, that is after last year’s earnings unexpectedly fell.
The Tokyo-based companies are the first of Japan’s three biggest banks to indicate how earnings this fiscal year will be dented by the Bank of Japan’s January decision to start charging lenders for some of their excess reserves parked at the institution. Some bank executives and analysts are concerned that the policy’s impact on lenders’ profits will outweigh its ability to revive inflation and economic growth.
“It’s still difficult to predict how much impact there will be from negative interest rates,” said Ryoji Yoshizawa, a director at S&P Global Ratings in Tokyo. “I think we’ll need to wait and see until at least the end of the second quarter.”
Mizuho is less pessimistic about next year’s outlook than analysts, who predict profit will fall to ¥575bn, according to the average of nine estimates compiled by Bloomberg. Analysts see Sumitomo Mitsui’s profit at ¥698bn, the survey showed.
Negative rates will have an impact of about 40bn yen on this year’s earnings, Mizuho chief executive officer Yasuhiro Sato said at a briefing in Tokyo. Sumitomo Mitsui expects a ¥20bn effect on pretax profit, president Koichi Miyata said.
Sumitomo Mitsui’s net income fell 14% to ¥646.7bn in the year ended March 31, missing its goal of ¥760bn. The result was hampered by declining trading and interest income, an impairment loss on its investment in PT Bank Tabungan Pensiunan Nasional, and provisions for losses on the refund of overcharged interest at consumer-finance units.
“It’s very disappointing that we missed our profit target last year,” Miyata said. “We’ll endeavour to make sure we clear the ¥700bn target for this year.”
Net income at Mizuho increased 9.6% to ¥670.9bn, beating Sumitomo Mitsui’s results for the first time in nine years and exceeding its ¥630bn target. Gains from sales of shareholdings and trading income helped to offset a drop in lending income.
Mizuho posted ¥205.7bn in gains on the sale of stock holdings as it made progress in reducing stakes in its corporate clients in accordance with Japan’s new corporate governance code. It aims to dispose of about ¥550bn of so-called cross-shareholdings in the next three years, according to a midterm business plan also released on Friday.
“The sale of equity holdings made a significant contribution last year,” S&P’s Yoshizawa said.
The Topix Banks Index is the worst-performing industry group on Japan’s benchmark stock gauge this year after tumbling 32%. Mizuho has dropped 33% while Sumitomo Mitsui has slid 28%. Mitsubishi UFJ Financial Group, the nation’s largest bank, has dropped 34%. It is scheduled to report results tomorrow.

Related Story