Business Context and Reporting Period
This Form 6-K filing by Mizuho Financial Group, Inc. (Mizuho) covers the 19th fiscal year ended March 31, 2021, and includes the convocation notice for the 19th Ordinary General Meeting of Shareholders scheduled for June 23, 2021. The filing details the group's financial performance, strategic progress under its 5-Year Business Plan, and significant operational challenges regarding system failures at its subsidiary, Mizuho Bank, Ltd., which occurred between February and March 2021.
Key Financial Metrics
Revenue and Profit (Fiscal Year 2020):
- Consolidated Net Business Profits: JPY 799.7 billion (Increase of JPY 127.1 billion year-over-year).
- Profit Attributable to Owners of Parent: JPY 471.0 billion (Increase of JPY 22.4 billion year-over-year).
- Consolidated ROE: 5.9% (Increase of 0.1% year-over-year).
- Ordinary Income: JPY 3,218.1 billion.
- Ordinary Profits: JPY 536.3 billion.
Capital and Liquidity:
- Common Equity Tier 1 (CET1) Capital Ratio: 9.1% (Reached the target level of the 5-Year Business Plan).
- Total Assets: JPY 225,586.2 billion.
- Total Net Assets: JPY 9,362.2 billion.
- Dividends: Annual cash dividend of JPY 75 per share (Year-end cash dividend of JPY 37.50 per share).
Costs and Reserves:
- Credit-related Costs: JPY 204.9 billion (Increase of JPY 33.2 billion year-over-year), including JPY 72.3 billion in reserves for possible losses on loans recorded based on future projections regarding the prolonged impact of COVID-19.
Material Changes vs. Prior Period
Performance Improvements:
- Mizuho exceeded its target for Consolidated Net Business Profits (JPY 710 billion) a year ahead of schedule.
- Profit attributable to owners increased despite higher credit-related costs, driven by solid performance in Customer Groups and Markets.
- The CET1 capital ratio reached the 9-10% target range in the second year of the 5-Year Business Plan.
Operational Challenges:
- Significant system failures at Mizuho Bank, Ltd. occurred in February and March 2021, causing transaction errors, ATM malfunctions, and service delays. Causes included memory capacity failures, hardware issues, and errors in program upgrades.
- Management has established a System Failure Special Investigative Committee and a System Failure Response Evaluation Committee to address root causes and prevent recurrence.
Strategic Shifts:
- Mizuho transitioned from a capital accumulation phase to a "Capital Utilization Phase" due to achieving its CET1 target.
- Revised capital management policy now prioritizes progressive dividends (targeting a 40% payout ratio) and flexible share buybacks.
Guidance, Outlook, and Risks
Management Commentary and Outlook:
- 5-Year Business Plan: Mizho continues to implement three structural reforms: business structure, finance structure, and corporate foundations. The group aims to become a partner for customers in a changing society, focusing on digitalization and sustainability.
- Shareholder Returns: The new policy emphasizes steady growth of the stable earnings base to support dividends, with share buybacks considered based on business results and capital adequacy.
- Sustainability: Mizuho has revised its Environmental Policy to contribute to a low-carbon society by 2050 and align its portfolio with the Paris Agreement targets.
Risks and Contingencies:
- System Failures: Ongoing reputational risk and operational instability due to recent IT failures. Management is committed to thorough investigation and prevention measures.
- Economic Environment: Uncertainty regarding the global economic recovery due to the spread of COVID-19 variants, potential supply chain disruptions, and geopolitical tensions.
- Forward-Looking Statements: The filing includes standard disclaimers that future performance is subject to risks including credit costs, interest rate changes, foreign exchange fluctuations, and cyber attacks.
Important Facts for Investor Verification
- System Failure Remediation: Verify the progress and conclusions of the System Failure Special Investigative Committee and the implementation of preventive measures to ensure operational stability.
- Capital Utilization Strategy: Monitor the execution of the new shareholder return policy, specifically the timing and scale of share buybacks and the adherence to the 40% dividend payout ratio target.
- Credit Quality: Assess the adequacy of the JPY 72.3 billion additional reserves for possible loan losses in light of the prolonged economic impact of the pandemic.
- Board Composition: Note the appointment of 13 directors, including new independent outside directors, and the reorganization of board committees to enhance governance oversight.
- Strategic Alliances: Track the development of the strategic alliance with SoftBank Corp. and the preparation of LINE Bank Preparatory Company for potential new banking business.