The lenders have seen declining CET1 ratios for the past two fiscal quarters. Barbara Pianese reports.

Japan’s biggest banks have reported a decrease in common equity Tier 1 (CET1), which is the highest quality of regulatory capital, between 2021 and 2022. From 2018 and 2022 Mizuho Financial Group’s CET1 fell from $86.56bn to $79.36bn; Mitsubishi UFJ Financial Group’s dropped from $153.04bn to $126.44bn; Sumitomo Mitsui Financial Group’s from $99.92bn to $91.39bn. 

The lenders have seen declining CET1 ratios for the past two fiscal quarters despite the ratios still being above the regulatory minimum of 4.5%.

A further decrease of the ratio might push the banks to increase their core capital more quickly or offload riskier assets, according to analysts.  

At the same time, the weakening of the Japanese yen against the US dollar in 2022 will positively influence their operating profits, says Fitch Ratings.

The rating agency expects the proportion of operating profit generated internationally to remain between 30% and 50% for the three megabanks in the financial year ending March 2023.

Banks in Japan have tried to expand overseas in the past few years to seek higher growth and mitigate the impact from ultra-low interest rates and a slowing loan market in Japan. 

“We require attention to the overseas markets as the US and Japanese capital markets have slumped,” Mizuho Financial CEO Masahiro Kihara told a press conference easier this month.


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