Net income at the six, Mitsubishi UFJ Financial Group, Mizuho Financial Group, Sumitomo Mitsui Financial Group, Resona Holdings, Sumitomo Trust & Banking Co and Chuo Mitsui Trust Holdings, declined by 45.4% from ¥1735.2bn to ¥947.9bn in the same period.
Modest increases in net interest income of 2.9%, largely as a result of Bank of Japan interest rate hikes, and net fee and commission income of 1.3% were offset by increased operating expenses and there was a drop in the reversal of loan loss provisions that had increased profit in the same period last year. Assets, excluding money held in trust and acceptances and guarantees, grew by only 2.9% as loan books remained largely static.
There was some variation: Chuo Mitsui Trust Holdings showed net interest income growth of 33.1% and 7.8% growth in net fee and commission income; and there was an uplift of 18.1% in the latter at Sumitomo Trust & Banking Co. over fiscal 2006.
Overall loan book quality remains good, with the ratio of gross risk-managed loans to total loans averaging 1.8%, although a deceleration of domestic economic recovery could affect this, as could the global economic slowdown, particularly for bank groups with significant loan assets domiciled outside Japan.
A report from rating agency Standard and Poor’s said the impact of the subprime loan problem on Japanese banks was limited, with a total outstanding balance of subprime loan-related investments of ¥930bn at September 30, 2007, mainly in the form of residential mortgage-backed securities and collateralised debt obligations backed by non-subprime loan assets.
Half-year results for major Japanese banks: September 30, 2007 (¥ millions)
