Published:  12:46 AM, 16 May 2019

Profits fall at Japan's top three banks as economy slows

Profits fall at Japan's top three banks as economy slows A man walk past a signboard of Sumitomo Mitsui Banking Corporation's signboard at its branch in Tokyo, Japan. -Reuters

Japan's three largest banks all reported lower annual profits on Wednesday, highlighting the challenges faced by the banking industry as the world's third-largest economy looks to be headed for another downturn.

The size of the declines varied - Sumitomo Mitsui Financial Group had a 1% drop while rival Mizuho reported an 83% dive - all three show the difficulty banks have in navigating Japan's ultra-loose monetary policy.

Japanese banks have had to cope for years with an ageing and shrinking population and massive central bank stimulus that has left them with razor-thin profit margins. Now, there are signs of economic weakness on the horizon.
A government assessment this week showed Japan may already be in recession due to the impact of a U.S.-China trade war and weak external demand. That is likely to drive up bad debt costs for banks as more loans go sour.

"Our core profit fell for a fourth straight year. We had expected this, but the environment is very tough," Kantesugu Mike, the chief executive of top lender Mitusbishi UFJ Financial Group, told a briefing.

MUFG, one of the world's largest banks by assets, reported a 12 percent slide in annual net profit, reflecting the squeeze on lending margins. The bank was also hit by a one-time charge from suspending development of a new system at a credit unit, reflecting increased competition from cashless services.

Mizuho, Japan's second-largest bank by assets, reported an 83% percent decline in net profit, to 96.6 billion yen ($884 million), in the year through March 2019.

That marked its weakest performance since the global financial crisis when the bank made a loss. The result was widely expected after Mizuho cut its outlook for the year two months ago.

-Reuters, Tokyo

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