MFG

Mizuho Financial Group Inc. - Fiscal 2019 Results Summary

Business Context and Reporting Period

This Form 6-K, filed on May 15, 2020, reports the consolidated financial results for Mizuho Financial Group, Inc. (MHFG) for the fiscal year ended March 31, 2020 (Fiscal 2019). The reporting period concluded amidst a deteriorating global economic environment driven by trade disputes and the emerging COVID-19 pandemic, which significantly impacted the final quarter of the fiscal year.

Key Financial Metrics

Material Changes vs. Prior Period

• Profit Surge: Profit attributable to owners of the parent increased dramatically by 364.5% to ¥448.6 billion. This was primarily driven by a significant reduction in extraordinary losses compared to the prior year, which included a large impairment of fixed assets in Fiscal 2018.
• Operating Performance: Consolidated Net Business Profits rose by ¥268.5 billion to ¥661.9 billion, supported by steady performance in customer groups and markets, and a reduction in General and Administrative Expenses by ¥52.4 billion due to structural reforms.
• Provisioning: Credit-related costs increased by ¥152.1 billion to ¥171.7 billion. This increase reflects the recording of reserves for possible losses on loans for specific credit exposures in anticipation of the economic impact of COVID-19.
• Balance Sheet: Total assets grew by ¥13.9 trillion, largely due to increases in Receivables under Resale Agreements, Securities, and Loans. Conversely, Total Net Assets decreased by ¥530.1 billion, primarily due to unrealized losses on securities and pension plan remeasurements recorded in Other Comprehensive Income.

Guidance, Outlook, and Risks

• Fiscal 2020 Guidance: Management estimates Ordinary Profits of ¥400.0 billion and Profit Attributable to Owners of Parent of ¥320.0 billion for the fiscal year ending March 31, 2021. This represents a projected decline of 28.6% in net profit compared to Fiscal 2019.
• Dividends: The Board approved an annual cash dividend of ¥7.50 per share for Fiscal 2019 (¥3.75 interim + ¥3.75 year-end), maintaining the level estimated at the start of the year despite the profit shortfall relative to initial estimates. The dividend estimate for Fiscal 2020 remains at ¥7.50 per share.
• Share Consolidation: The Board resolved to propose a 1-for-10 share consolidation effective October 1, 2020. Adjusted for this consolidation, the estimated dividend for Fiscal 2020 would be ¥37.50 per share, and estimated Net Income per Share would be ¥126.12.
• Risks and Contingencies: The filing highlights significant risks related to the prolonged impact of COVID-19, including potential increases in credit costs, declines in securities portfolio value, and reduced market liquidity. Management noted that earnings estimates may be revised if the pandemic's impact worsens.

Investor Verification Checklist

• Credit Cost Trajectory: Verify the adequacy of the ¥171.7 billion in credit-related costs and monitor for further provisioning as the economic impact of COVID-19 materializes in Fiscal 2020.
• Capital Adequacy: Review the decline in the Own Capital Ratio (3.9%) and Total Net Assets to ensure compliance with Basel regulatory frameworks and internal capital targets.
• Share Consolidation Impact: Confirm the mechanics and timing of the 1-for-10 share consolidation scheduled for October 2020 and its effect on liquidity and per-share metrics.
• Dividend Sustainability: Assess the ability to maintain the ¥7.50 annual dividend in Fiscal 2020 given the projected 28.6% drop in net profit and the need to strengthen the capital base.
• Unrealized Losses: Examine the composition of the ¥449.5 billion in Other Comprehensive Income losses, specifically regarding unrealized losses on securities and pension plan remeasurements.