Mizuho wields axe as profit falls
Lender confirms mass lay-off plan
TOKYO: Mizuho Financial Group Inc’s profit fell and the Japanese bank offered a bleak assessment of the long-term outlook, confirming that it will eliminate thousands of jobs to cut costs.
Japan’s third-biggest lender by assets said it would shed 19,000 positions — about a quarter of its workforce — in the next 10 years, confirming recent media reports.
Lending income declined in the fiscal second quarter, underscoring how negative interest rates are making it tougher for Japan’s biggest banks to make money from doling out credit.
“Our expense ratio has risen significantly and this remains a major challenge, which is why we need fundamental structural reforms,” president and CEO Yasuhiro Sato told reporters in Tokyo yesterday.
“Growing the top line is difficult in this global competitive environment, so it’s essential that we improve our productivity.”
Like their global peers, Japanese banks are contending with rapid advancements in technologies that are threatening traditional jobs in the industry while also providing an opportunity to make processes more efficient.
Rival Sumitomo Mitsui Financial Group Inc said yesterday that it has been using technology to boost productivity and cut costs.
“We expect Mizuho’s structural transformation to help control its rising operating expenses,” said Shunsaku Sato, a senior credit officer at Moody’s Investors Service in Tokyo.
The banking group has the worst efficiency ratio — a measure of costs to income — among Japan’s biggest lenders, according to data compiled by Bloomberg.
Net income fell 12% to 198.4 billion yen ($1.7 billion) in the three months ended Sept 30, due to the slump in lending and fee businesses.
The result still beat the 146.9 billion yen average estimate of five analysts, as the Tokyo-based bank was able to claw back money set aside for bad loans.
Mizuho’s net interest income, or profits from lending and bond coupons, fell to 407.4 billion yen for the first six months, from 436.4 billion yen a year earlier.
But a bright spot for Mizuho, like other Japanese banks, was bad loan costs that narrowed, with a gradual improvement in the country’s economy improving borrowers’ credit-worthiness.
Mizuho’s profit was also helped by gains from selling its stock holdings, which came at 107.9 billion yen in the April-September period, up from 60.9 billion yen a year earlier.
For the full-year through March, Mizuho kept its net profit forecast of 550 billion yen, down 8.8% from the previous year and above an average estimate of 547.6 billion yen from 16 analysts polled by Thomson Reuters.
Shares of Mizuho closed 0.8% lower before the announcement. The stock has slipped about 4% this year.
As part of its restructuring, Mizuho said it would cut about 100 branches over eight years.
Sato said the bank would move employees whose roles are reduced by the anticipated improvements in efficiency.
“This is not only about decreasing people,” he said. “It’s also about redeploying people to the front lines.”
The Bank of Japan said last month that the nation’s lenders may have too many employees and branches, and the overcapacity is contributing to a drop in earnings power that may hurt the financial system.
Sumitomo Mitsui said earlier yesterday that it eliminated 400,000 worker hours using so-called robotic process automation and plans to extend that to three
million, or the equivalent of 1,500 jobs, within three years.
“The exercise will eventually save about 100 billion yen,’’ it said in a statement.
Other global banks are also cutting jobs because of technology. National Australia Bank Ltd announced plans to eliminate 4,000 positions earlier this month, citing the need for automation. Sweden’s Nordea Bank AB last month announced 6,000 job cuts.
Sumitomo Mitsui and Mitsubishi UFJ Financial Group Inc are scheduled to post second-quarter results today.