Mizuho lifts annual guidance after bumper Q2 as rate hikes boost margins

By Anton Bridge

TOKYO (Reuters) -Mizuho Financial Group reported a 62% jump in second-quarter net profit and lifted its annual guidance on Thursday, fuelled by robust lending demand and higher margins following a July interest rate hike by the Bank of Japan.

Japan’s third-largest lender by assets raised its net profit forecast to a record 820 billion yen ($5.26 billion) from 750 billion yen for the year ending on March 31.

Underscoring the bumper results, Mizuho (NYSE:MFG) announced a share buyback of up to 100 billion yen – its first in 16 years – while lifting its previous dividend estimate by 15 yen to 130 yen for the year.

“We have entered a new stage of growth investment and strengthening shareholder returns,” CEO Masahiro Kihara told a media briefing.

Japan’s megabanks, all reporting financial results on Thursday, are set to benefit from higher interest rates after seven years of negative interest rates kept lending margins razor-thin.

The central bank raised its policy rate to 0.25% in July after ending negative interest ends in March, pushing Mizuho’s loan and deposit rate margin for its domestic lending business up for the second consecutive quarter.

Mizuho estimated the financial impact from the pair of rate hikes would total 85 billion yen over the course of this financial year.

For the July-September period, it reported a group net profit of 277 billion yen, up from 170 billion yen in the same quarter a year earlier. Fellow megabanks Mitsubishi UFJ (NYSE:MUFG) Financial Group and Sumitomo Mitsui Financial Group (NYSE:SMFG) report results later on Thursday.

($1 = 155.8400 yen)