Mizuho Financial Group Inc. - Fiscal 2018 Results Summary
Business Context and Reporting Period
This Form 6-K filing, dated May 15, 2019, reports the consolidated financial results for Mizuho Financial Group, Inc. (MHFG) for the fiscal year ended March 31, 2019 (Fiscal 2018). The results are prepared under Japanese GAAP. The reporting period was characterized by a global economic environment of gradual recovery in the U.S., contrasted with slowdowns in China and Europe due to trade disputes and Brexit uncertainties. In Japan, the economy trended toward recovery, though exports declined.
Key Financial Metrics
| Metric | Fiscal 2018 | Fiscal 2017 | Change |
|---|---|---|---|
| Ordinary Income | ¥3,925,649 million | ¥3,561,125 million | +10.2% |
| Ordinary Profits | ¥614,118 million | ¥782,447 million | -21.5% |
| Profit Attributable to Owners of Parent | ¥96,566 million | ¥576,547 million | -83.2% |
| Net Income per Share | ¥3.80 | ¥22.72 | -83.3% |
| Total Assets | ¥200,792,226 million | ¥205,028,300 million | -2.1% |
| Total Net Assets | ¥9,194,038 million | ¥9,821,246 million | -6.4% |
| Own Capital Ratio | 4.3% | 4.4% | -0.1 pp |
| Cash and Cash Equivalents | ¥44,254,874 million | ¥46,334,334 million | -4.5% |
Material Changes vs. Prior Period
- Significant Profit Decline: Profit attributable to owners of the parent plummeted by 83.2% to ¥96.6 billion. This was primarily driven by a massive increase in extraordinary losses of ¥497.8 billion (compared to ¥17.5 billion in the prior year), largely due to recording losses related to structural reform and impairment of fixed assets (¥503.6 billion).
- Operating Performance: Despite the net profit drop, Ordinary Income increased by 10.2% to ¥3.9 trillion. However, Ordinary Profits decreased by 21.5% to ¥614.1 billion due to higher expenses and lower gains on reversal of reserves for possible losses on loans.
- Segment Performance: Consolidated Net Business Profits decreased by ¥64.4 billion to ¥393.3 billion. Mizuho Bank and Mizuho Trust & Banking saw a decrease in gross profits of ¥96.1 billion, mainly due to portfolio restructuring and a shift to foreign bonds. Mizuho Securities reported a decrease in Net Operating Revenues of ¥22.1 billion.
- Balance Sheet: Total assets decreased by ¥4.2 trillion, driven by a ¥4.4 trillion reduction in securities. Loans and Bills Discounted decreased by ¥964.5 billion, while Deposits increased by ¥1.2 trillion.
- Cash Flow: Operating activities resulted in a net cash outflow of ¥2.6 trillion (compared to an inflow of ¥3.0 trillion in the prior year), primarily due to increased call loans. Investing activities provided ¥5.5 trillion in cash, mainly from the sale and redemption of securities.
Guidance, Outlook, and Management Commentary
- Fiscal 2019 Guidance: Management forecasts Ordinary Profits of ¥700.0 billion and Profit Attributable to Owners of Parent of ¥470.0 billion for the fiscal year ending March 31, 2020. This represents a significant recovery, with net income per share estimated at ¥18.52.
- Dividend Policy: The Board decided to maintain the annual cash dividend at ¥7.50 per share (¥3.75 interim + ¥3.75 year-end) for Fiscal 2018, despite the sharp decline in net income. This decision was based on the Group's strong capital adequacy (Common Equity Tier 1 ratio exceeding the 10% target) and a commitment to steady returns. The same dividend level is estimated for Fiscal 2019.
- Strategic Focus: Management continues to pursue disciplined capital management, balancing a stable capital base with shareholder returns. The Group is implementing a new five-year business plan starting in Fiscal 2019.
- Risks: Forward-looking statements are subject to risks including credit-related costs, declines in securities portfolio value, interest rate changes, foreign currency fluctuations, and geopolitical risks (trade disputes, Brexit).
Key Facts for Investor Verification
- One-Time Charges: Verify the specific nature and magnitude of the ¥503.6 billion impairment of fixed assets and other extraordinary losses related to "structural reform" that drove the 83% drop in net income.
- Capital Adequacy: Confirm the Common Equity Tier 1 Capital Ratio of 12.76% (as of March 31, 2019) against regulatory requirements and the Group's internal targets to validate the sustainability of the dividend policy.
- Portfolio Restructuring: Assess the impact of the shift to foreign bonds and portfolio restructuring on future trading income and interest margins, given the reported decrease in gross profits for the banking subsidiaries.
- Deferred Tax Assets: Review the valuation allowance and recoverability of deferred tax assets, particularly given the significant deferred tax benefit (¥163.9 billion) recorded in the current period which offset current tax expenses.
- Non-Performing Loans (NPLs): Monitor the coverage ratio for NPLs (69.3% for aggregate banks) and the trend in claims with collection risk, which increased by ¥67.1 billion year-over-year.