Two of Japan’s mega-banks, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc (SMFG), forecast a drop in credit-related costs this year on Friday due to forecasts of economic recovery as vaccination continues.
Mizuho (8411.T) predicts lending costs of 100 billion yen ($ 914.6 million) this year, while SMFG predicts costs of 300 billion yen. Both figures were lower than last year.
Prime Minister Yoshihide Suga last week vowed to speed up the government’s vaccination efforts and said he aims to deliver 1 million vaccines per day. Read more
As Japanese banks grapple with low interest rates and a shrinking population, they have seen an increase in lending since last year as businesses rush to borrow due to the COVID-19 pandemic.
Bank lending to Japan rose 4.8% in April from a year earlier, according to data compiled by the Bank of Japan.
Japanese bank shares outperformed the benchmark Nikkei’s 2.3% rise (.N225) year-to-date, Mizuho shares up 23.7%, SMFG up 25.5 %.
“While the Japanese economy is expected to gradually recover as vaccination continues, it is still unclear how COVID-19 would impact specific industries,” said SMFG chief executive Jun. Ohta, during an update on the results.
Japan has not suffered as much as other countries from the pandemic, but its vaccination campaign has been slow. So far, only about 3% of the population of around 126 million people have received at least one dose of the vaccine, according to Reuters data.
While banks expect credit costs to reduce this fiscal year, they need to keep a close eye on longer-term costs, said Ryoji Yoshizawa, senior director of S&P Global Ratings.
“The repayment capacity of some sectors such as aviation and retail is deteriorating … It is not known whether they can withstand growing debt in the post COVID-19 era,” he said. declared.
(1 USD = 109.3400 yen)
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