Mizuho Financial Group(MFG) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Indicators Changes - Consolidated net business profits increased by JPY40.9 billion year-on-year to JPY460.3 billion, achieving 58% of the fiscal plan of JPY790 billion [6] - Net income attributable to the financial group was JPY385.6 billion, up JPY170.1 billion against the fiscal year plan, reaching 75% of the target [11][27] - CET1 ratio increased by 0.64% compared to March 2021 to 12.27%, mainly due to profit increase [23] Business Line Data and Key Indicators Changes - Retail & Business Banking saw significant growth in noninterest income, particularly from real estate-related activities, increasing by JPY35.9 billion year-on-year [11] - Corporate and Institutional Banking experienced a decline in large solution revenues but reported an increase in loan balances by JPY8.2 billion year-on-year [12] - Noninterest income for customer growth increased by JPY34.5 billion year-on-year, with retail and business banking showing improvement [17] Market Data and Key Indicators Changes - Non-Japanese yen customer loans declined by JPY2.2 billion due to repayments of COVID-related loans [14] - Domestic loans average balance declined by JPY1.1 trillion, while loan spread improved by 1 basis point year-on-year [15] - Unrealized gains on securities portfolio increased to JPY1.589 trillion, up JPY18 billion from March 2021 [21] Company Strategy and Development Direction - The company aims to balance capital adequacy, growth investments, and enhanced shareholder returns, with a focus on IT and digital fields for future growth [29] - A revised fiscal year 2021 plan indicates a cautious approach to credit-related costs and market conditions, with a downward revision of net gains related to stocks [25][26] - The company plans to continue reducing gross shareholdings, achieving 97% progress towards a target of JPY300 billion by March 2022 [22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from system failures and their potential impact on gross profit and expenses, estimating a negative impact of JPY3 billion on gross profit [35] - The outlook remains cautious due to uncertainties related to COVID-19, supply chain constraints, and energy price increases [41][78] - Management expressed confidence in achieving a net income of around JPY500 billion, maintaining a 40% payout ratio for dividends [42] Other Important Information - The interim dividend will be JPY40 per share, an increase of JPY2.5 from the initial forecast, marking the first increase in seven years [28] - The company is making steady progress against its five-year business plan initiated in fiscal year 2019 [30] Q&A Session Summary Question: Impact of system failure on management performance and costs - Management indicated a JPY3 billion negative impact on gross profit and potential increases in expenses due to system failures, with a total earmarked for expenses potentially exceeding JPY18 billion [35][36][38] Question: Reason for dividend increase announcement - The dividend increase was announced due to improved visibility on achieving the original guidance of JPY510 billion, despite ongoing uncertainties [40][42] Question: Credit-related costs and expectations for the second half - Management confirmed that credit-related costs are expected to remain cautious, with forward-looking provisions set aside similarly to the first half [46][48] Question: Potential for share buybacks - Management stated that while they have not indicated plans for share buybacks, they are considering incremental returns and will balance growth investments with shareholder returns [63] Question: Room for further improvements in G&A expenses - Management acknowledged room for further improvements in G&A expenses, particularly in light of changes in work practices due to COVID-19 [68][70] Question: Outlook for loan spreads - Management expects loan spreads to stabilize, with a belief that while improvements have been seen, significant further growth may not continue [71][72] Question: Credit costs by industry and large exposures - Management emphasized the need for vigilance across all sectors, particularly those impacted by COVID-19, and indicated that gradual impacts may persist [76][78]