The good news is Mitsubishi UFJ Financial Group is one of the three profitable banks that reported. The bad news is, Mizuho isn’t one of them.
Due to low interest rates and the rally in global equities, Japan’s biggest bank returned to profitability with Y75.9bn or approximately $792m, up from Y51.20 billion in the same period last year. Revenue stood at Y1.336 trillion, versus last year’s Y1.438 trillion.
The FT noted: “After making hundreds of billions of yen in provisions for bad debts in the previous quarter, credit losses were lower, although still up on the levels of last year. The banks indicated that credit quality for Japanese individuals and small businesses was broadly stable.”
The ugly duckling is Mizuho Financial, which retained its losses due to declining valuations in its credit default swaps that caused significant losses.
The banks posted a net loss of ¥4.49 billion or $47 million for its FY Q1 ending in June while revenue also sank 27% to ¥703.47bn from ¥957.37bn.
The reported losses: ¥88 billion from derivatives trading, 60.6bn of which were from credit default swaps after a sharp drop in CDS prices amid seeming recovery in the global economy. That it had ¥19.8 billion loss on its equity-holdings for the first quarter, which is sharply lower than the previous quarter’s ¥203.4bn helped.