January 31, 2018 / 10:01 AM / a year ago

UPDATE 1-Stock portfolios help SMFG, Mizuho Q3 earnings

* Japanese banks selling stock portfolio to reduce market risks

* SMFG Q3 net profit up 23 pct, Mizuho up 8.6 pct

* Mizuho books gains from clawback of past bad loan provisions (Adds SMFG earnings, changes to quarterly figures)

By Taiga Uranaka

TOKYO, Jan 31 (Reuters) - A steadily improving Japanese economy and a stock market rally helped to counter the impact of low interest rates on two of the country’s major banks, boosting their bottom lines in the third quarter.

Sumitomo Mitsui Financial Group (SMFG), Japan’s second-largest bank by market valuation, and Mizuho Financial Group, the third-largest lender, both reported hefty gains in their stock portfolios.

Net profit at SMFG rose 23 percent to 227.9 billion yen ($2.1 billion) in the quarter ended in December, according to Reuters calculations. SMFG and other Japanese banks disclose only cumulative nine-month figures.

SMFG’s gains from its stock portfolio more than doubled in the nine months, as Japanese banks actively reduced holdings of their corporate clients’ shares originally purchased to cement business ties, a practice criticised as exposing the banks to market swings.

A rally in the stock market at home and abroad also lifted the performance of its brokerage and investment banking unit.

SMFG kept its full-year forecast of 630 billion yen, down 10.8 percent from the previous year, despite posting a net profit of 648.1 billion yen in the nine months.

SMFG said in a statement it did not expect any major risk factors at the moment, but did not revise its full-year guidance in case of any changes in the business environment.

Its forecast was below an average estimate of 680.6 billion yen in a poll of 12 analysts by Thomson Reuters.


In addition to hefty gains from its stock portfolio, a clawback of bad loan provisions lifted Mizuho’s net profit by 8.6 percent to 159 billion yen in the October-December period.

The bank said it booked a 169.4 billion yen gain for the nine-month period ended in December after it released bad loan provisions set aside in the past, as the likelihood of some borrowers’ defaulting had declined.

While the lender has been hurt by rock-bottom interest rates amid the Bank of Japan’s massive stimulus measures, it said fee revenues improved in the latest quarter.

For the full year through March, Mizuho kept its net profit forecast of 550 billion yen, down 8.8 percent from the previous year, but above an average estimate of 544.2 billion yen in a poll of 14 analysts by Thomson Reuters.

The country’s No. 1 lender Mitsubishi UFJ Financial Group will announce its results on Friday. ($1 = 108.6800 yen) (Editing by Jacqueline Wong)

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