Mizuho Financial Group and Sumitomo Mitsui Financial Group expect core lending activities to remain sluggish this year, with little clarity so far about the strength of demand for loans related to earthquake reconstruction efforts. Shares of Japan's top banks fell on Friday after comments from the government's top spokesman appeared to indicate banks may be asked to forgive some loans to Tokyo Electric Power , the operator of a crippled nuclear plant.
While the direct impact of the March 11 earthquake and tsunami has been relatively limited on the lenders, the ensuing stock market plunge, led by Tokyo Electric shares, dealt a blow to them. Both Mizuho and SMFG fell into the red in the final quarter of the year just ended, hurt by losses on their holdings in Tokyo Electric and other stocks.
Mizuho Financial Group, Japan's second-largest bank by assets, posted a loss of 8.8 billion yen ($108 million) for the three months ended in March versus a profit of 113 billion yen a year ago. SMFG, Japan's third-largest by assets, said its fourth-quarter net loss was 39 billion yen compared with a profit of 24 billion a year earlier. For the year through March 2012, SMFG forecast a net profit of 400 billion yen ($4.9 billion), down 15.9 percent from the previous year and slightly above Thomson Reuters Starmine's SmartEstimate of 396.7 billion yen.
The lender said the fall is mostly due to the absence of hefty bond gains that boosted SMFG and its bigger rivals in the previous financial year. Mizuho forecast net profit of 460 billion yen this year, up 11 percent from the previous financial year and above Thomson Reuters Starmine's SmartEstimate of 378.5 billion yen. Central bank data showed on Thursday that Japanese bank lending fell 0.9 percent in April from a year earlier, extending its decline for a 17th consecutive month.
SMFG said it aims to raise overseas earnings against total client businesses to about 30 percent over three years from 23 percent now by expanding its commercial banking business in Asia. The market interpreted his comments as an indication banks may be asked to forgive some loans. Shares of SMFG, the utility's main creditor bank, dropped 3.8 percent, while Mizuho's stock dropped 3 percent.