Japan’s Big Three Banks Raise Earnings Forecasts to New Records on November 13

Key Facts

Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group raised their annual profit forecasts to new records on November 13, according to a Reuters report. The revisions came as higher interest rates supported lending margins and companies sought loans to fund growth, capital spending and mergers and acquisitions. But the groups’ performance in the July-to-September quarter varied: MUFG and Mizuho profit rose, while SMFG profit fell year on year. SMFG and Mizuho also announced expanded share buyback programs. At the same time, SMFG warned that a slowdown in investment in AI data centers could weigh on the economy and its results.

SMFG raised its forecast for net profit in the fiscal year ending in March 2027 to 1.9 trillion yen, from 1.7 trillion yen. The group expanded its share buyback program by 220 billion yen, bringing the total to 400 billion yen for the fiscal year. The higher annual guidance came despite quarterly net profit of 501.8 billion yen in the July-to-September period, down 10% from the same period a year earlier. The year-earlier comparison included a 94 billion yen gain from the group’s sale of its stake in India’s Kotak Mahindra Bank. That means the quarterly comparison was affected by an exceptional gain in the prior period, alongside the improvement in operating factors reported across the sector.

Mizuho raised its annual net profit forecast to 1.6 trillion yen from 1.4 trillion yen and doubled its share buyback program for the fiscal year to 400 billion yen. Its net profit rose 19% year on year in the July-to-September quarter to 473.6 billion yen. Unlike SMFG, it recorded an annual increase in net profit for the quarter. The group’s figures combine a higher annual forecast with increased direct returns to shareholders through buybacks. These steps place Mizuho among the wave of forecast increases by Japan’s three largest banking groups.

MUFG reported quarterly net profit of 821.5 billion yen, up 10% from a year earlier. The group raised its annual profit forecast to 2.8 trillion yen from 2.7 trillion yen. Its quarterly profit therefore rose, while SMFG’s fell and Mizuho posted growth. The Reuters report attributed support for the sector to corporate financing for growth investment, capital spending and mergers and acquisitions, as well as higher interest rates and the resulting increase in lending margins. These factors provide a common backdrop to the forecast increases, while quarterly results remained mixed across the groups.

Alongside those supportive factors, financing concentration in data centers emerged as a risk as AI-related investment expanded. SMFG’s chief executive said a slowdown in investment in the sector could affect the Japanese and global economies and be reflected in the group’s results over the following six months. He added that the group had tightened credit standards for data center projects and limited financing to highly creditworthy hyperscalers. This reflects a more cautious approach to financing the sector, alongside the warning about the impact of any slowdown in its spending. MUFG put its credit exposure to data centers at 3.3 trillion yen, compared with total credit exposure of 180 trillion yen as of November 13.

The banks’ results come amid a gradual tightening of Japanese monetary policy. On October 30, the Bank of Japan kept its interest rate at 1.25%, while policy board member Hajime Takata proposed raising it to 1.5%; the proposal was rejected. The bank raised its core inflation forecast for the fiscal year ending in March 2028 to 2.6% from 2.4% in its previous estimate. A bank survey also showed that the diffusion index for major banks reporting an increase in corporate financing demand stood at +3, compared with -1 in the previous survey three months earlier. Deputy Governor Ryozo Himino said financial conditions remained accommodative after the rate increase the previous month, citing low real borrowing costs and growth in bank lending.

In the minutes of the September meeting, policymakers said rates needed to continue rising, and one member said the bank should accelerate the pace if signs emerged that prices were deviating to the upside. Governor Kazuo Ueda said the bank would discuss interest rates at every meeting, including the December meeting, without committing in advance to a set pace of increases. The September decision had raised the rate to 1.25% by a 7-2 vote. Most economists surveyed by Reuters expected the policy rate to rise to 1.5% in December, with their estimates for the terminal rate clustered between 1.75% and 2%. These are analyst estimates, not an announced decision by the bank.

The Bank of Japan calendar also lists a speech by policy board member Takata on November 16 and a speech by board member Naoki Tamura on November 26. These dates follow the banks’ announcement of higher annual forecasts and SMFG’s warning about risks from a slowdown in data center investment. As for the shares, the information provided does not include closing prices for the November 13 session; the latest recorded close is from November 12. The information therefore does not measure the price reaction during the announcement session.