Japanese banks sound caution for earnings as Omicron highlights bad loan risks
Japan’s top banking groups gave cautious outlooks on Wednesday for the coming months as they brace for risks associated with COVID-19’s Omicron variant outbreak and turbulence in global markets.
Top lender Mitsubishi UFJ Financial Group Inc (8306.T) kept its net profit outlook for the year through March at 1.05 trillion yen ($9.16 billion), even though its third-quarter profit rose 40% from a year earlier, bringing the nine-month total to 1.07 trillion yen.
The annual forecast compared with the 1.08 trillion yen average of 11 analysts’ estimates compiled by Refinitiv.
“Overall credit costs are likely to come within our expectations” for the full year, an MUFG spokesperson said at a briefing.
“But given chip shortages affecting supply chains and the Omicron outbreak clouding the economic outlook, we will need to consider possibilities of booking provisions in a forwardlooking manner,” he said.
Banks’ earnings were inflated over the last few quarters by the release of cash from provisions that had been set aside to deal with a potential flood of pandemic-related bad loans as government subsidies kept many businesses afloat.
But the boost from such moves waned in the third quarter.
Sumitomo Mitsui Financial Group Inc (8316.T), the country’s second-largest bank, reported a third-quarter net profit of 168.7 billion yen,up 3% from a year earlier, as credit costs turned up with provisions booked for some large borrowers.
Net profit at Mizuho Financial Group Inc (8411.T), the country’s No. 3 lender, dropped 33% to 93.0 billion yen for the three months through December.
Sumitomo Mitsui and Mizuho both maintained their full-year profit forecasts.