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Top 1000 World Banks – Japanese banks struggle to grow in tough environment

Japan's banks continue to be affected by deflation, showing mixed results in 2015's Top 1000 World Banks ranking. 
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Faced with a sluggish local banking sector, a huge stimulus programme that is squeezing net interest income without reinstating self-belief in the economy, and two-decade long deflation, Japanese banks have shown mixed results in 2015’s Top 1000 World Banks ranking. Performance in annual growth in asset and Tier 1 capital bases is poor. Assets have dropped on average by 9.5% and Tier 1 capital has dropped by 9.12%. Even pre-tax profits, which in 2014 had a year-on-year aggregate growth of 11%, have dropped by 3% on average.

Top 25 banks in Japan

The top bank in the country ranking – Mitsubishi UFJ Financial Group – retains the top position this year, with a slight increase in Tier 1 capital from $117.2bn to $117.6bn after it had dropped by 1.6% in the 2014 ranking. Its pre-tax profits, however, dropped by a notable 10.89% to $13.4bn.

Sumitomo Mitsui Financial Group retains its position as the second largest bank in Japan, but its Tier 1 capital is down by $354m to $71bn. Pre-tax profits have also performed poorly, with a year-on-year cut of 21.63% to $10.9bn.

Apart from Mitsubishi UFJ Financial Group, Mizuho Financial Group and Norinchukin Bank – a quasi-public institution set up in 1923 to manage the deposits of millions of farmers, fishermen and forest workers – the top 10 banks in the Japan ranking have all dropped down in the overall Top 1000 ranking. Norinchukin Bank has risen by three spots to position 29 globally, however. The lender is also the highest mover in the Japanese banking sector, with a 1.88% annual increase in Tier 1 capital.

Meanwhile, Mitsubishi UFJ Financial Group and Mizuho Financial Group have stayed in the same world ranking places of 10 and 21, respectively.

Only three banks qualify as 'highest movers' in Japan, with year-on-year increases in Tier 1 capital of 1.88% at the most, this at Norinchukin Bank. Shiga Bank and Iyo Bank come in second and third with 1.62% and 1.43% increases, respectively. All other banks are down in terms of Tier 1 capital.

In 2014, there were no new Japanese entrants in the Top 1000 World Bank ranking. However, this year there are two: Tokyo TY Financial Group and Hekikai Shinkin Bank. They have Tier 1 capital bases of $1.6bn and $1.49bn, and are mid-ranking lenders in the global ranking at positions 477 and 508, respectively.

As in 2014, return on capital performance this year is comparatively rosier for Japanese banks. The average increases for 2014 (20.79%) and 2015 (20.72%) are very similar. North Pacific Bank, which topped this classification in 2014, no longer features. Interestingly, new entrant Tokyo TY Financial Group topped the ranking this year with a return on capital of 32.31%.

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