Business Context and Reporting Period
Company: Mizuho Financial Group, Inc.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Date: January 29, 2015
Financial Period: Data presented is as of September 30, 2014, with comparative data for September 30, 2013.
Context: This filing discloses capital adequacy information based on Japanese GAAP and the Basel III framework. It details the consolidated capital adequacy status of Mizuho Financial Group and its major subsidiaries (Mizuho Bank, Mizuho Trust & Banking). The filing does not contain standard revenue or profit statements but focuses on regulatory capital, risk-weighted assets, and exposure breakdowns.
Key Financial Metrics (Capital Adequacy)
The following metrics reflect the consolidated position of Mizuho Financial Group as of September 30, 2014 (in billions of yen, unless noted otherwise):
| Metric | Sept 30, 2014 | Sept 30, 2013 |
|---|---|---|
| Total Capital Ratio | 15.06% | 14.97% |
| Tier 1 Capital Ratio | 11.85% | 11.70% |
| Common Equity Tier 1 (CET1) Ratio | 9.32% | 8.78% |
| Total Capital | 9,167.5 | 8,806.6 |
| Tier 1 Capital | 7,217.2 | 6,881.2 |
| CET1 Capital | 5,677.2 | 5,166.6 |
| Risk-Weighted Assets (RWA) | 60,865.9 | 58,790.1 |
Subsidiary Highlights (Sept 30, 2014):
- Mizuho Bank (Consolidated): Total Capital Ratio 16.02% (down from 16.48%).
- Mizuho Trust & Banking (Consolidated): Total Capital Ratio 19.06% (up from 18.60%).
Material Changes vs. Prior Period
- Capital Strength: The Group's Total Capital increased by approximately 360.9 billion yen (4.1%) and CET1 capital increased by 510.6 billion yen (9.9%) compared to the prior year. Consequently, all three capital ratios (Total, Tier 1, and CET1) improved.
- Risk-Weighted Assets: RWA increased by 2,075.8 billion yen (3.5%), driven by growth in credit risk exposures.
- Asset Composition: Total assets on the consolidated balance sheet grew from 182.1 trillion yen to 187.5 trillion yen. Loans and bills discounted increased to 70.2 trillion yen.
- Losses: Actual losses for the period ended September 30, 2014, were negative 55.2 billion yen (indicating a net release of reserves or gains), a significant improvement from the 22.5 billion yen in losses recorded in the prior year. This was primarily due to a decrease in losses from corporate exposure.
- Non-Performing Assets: Exposure past due three months or more or in default decreased from 1,517.1 billion yen to 1,213.6 billion yen.
Outlook, Risks, and Commentary
Management Commentary & Methodology:
The Group applies the Advanced Internal Ratings-Based Approach (IRB) for credit risk and the Advanced Measurement Approach (AMA) for operational risk. The filing notes that the capital adequacy calculation was examined by Ernst & Young ShinNihon LLC under agreed-upon procedures, though this does not constitute an audit opinion on the ratio itself.
Risk Exposure:
- Credit Risk: Total credit risk exposure (EAD) was 182.9 trillion yen. The largest exposure categories were Sovereign (75.1 trillion yen) and Corporate (61.7 trillion yen).
- Geographic Distribution: Domestic exposure totaled 124.4 trillion yen, while Overseas exposure was 44.7 trillion yen. North America represented the largest overseas region (18.8 trillion yen).
- Market Risk: Value at Risk (VaR) for trading activities averaged 4.1 billion yen for the six months ended September 30, 2014. Stressed VaR averaged 11.5 billion yen.
- Outlier Criteria: The loss ratio to broadly-defined capital under interest rate shock scenarios was 4.8% as of September 30, 2014, well below the 20% threshold that would trigger "outlier" status.
Securitization:
The Group maintains exposure as an originator, sponsor, and investor. Total securitization exposure as an investor was 1.84 trillion yen as of September 30, 2014.
Investor Verification Checklist
- Capital Adequacy Trends: Verify the continued improvement in CET1 ratios against regulatory minimums and peer benchmarks.
- Asset Quality: Monitor the trend in "exposure past due three months or more" and the specific reserve for possible losses on loans, which decreased to 187.9 billion yen.
- Geographic Concentration: Assess the risk profile of the significant overseas exposure, particularly in North America and Asia.
- Securitization Exposure: Review the breakdown of retained securitization exposure (1.84 trillion yen as investor) for potential hidden risks.
- Market Risk Volatility: Track the VaR and Stressed VaR figures to gauge the volatility of the trading book relative to capital buffers.