As central banks in the West edge away from ultra-loose monetary policy, all eyes are on Bank of Japan to see if it follows suit. The Banker data reveals the biggest potential winners.
US and EU banks were buoyed by central bank announcements in the final weeks of 2016. The Federal Reserve lifted rates by 25 basis points and hinted at up to three hikes this year. Meanwhile, the European Central Bank (ECB) extended the timeline for its quantitative easing (QE) programme but reduced monthly purchases from €80bn to €60bn.
All eyes are now on Bank of Japan (BoJ), the architect of QE, which took the bold move of cutting rates to negative early last year. At its December 2016 meeting BoJ held rates steady, but raised its economic forecast. If BoJ follows the lead of its US and EU counterparts, the country’s biggest lenders are among those that would benefit most.
Japan’s largest bank as measured by capital (and assets) is Mitsubishi UFJ Financial Group which has a Bank for International Settlements (BIS) ratio of 16.01%. It’s followed by Sumitomo Mitsui Financial Group which is 39% smaller in terms of Tier 1 capital, but has a slightly plumper BIS ratio of 17.02%.
Mizuho Financial Group ranks third by capital but is the second biggest by assets, of which it owns 3.55% more than Sumitomo Mitsui Financial Group.
Some way behind is Norinchukin Bank ($55.875bn in Tier 1 capital) and after another significant gap Nomura Holdings ($22.871bn). Their BIS ratios, 25.07% and 18.1% respectively, are the healthiest of the top five but their profit ratios have been hit. Norinchukin’s return on capital ratio is 5.14% and Nomura’s 6.41%, while the biggest three banks’ hover between 10.1% and 12.75%.
All data sourced from www.thebanker.com
