- Rising Japan rates are boosting Mizuho’s margins and net interest income, lifting 1H FY2025 profit and prompting a higher full-year earnings outlook.
- The bank is accelerating balance-sheet cleanup as NPLs fall on large disposals, but credit costs have jumped.
- Headwinds include sizable domestic deposit outflows, weaker overseas trading income, and rising operating expenses.
- Still lagging larger peers, Mizuho could re-rate if rate-driven gains and restructuring progress prove durable amid FX and macro risks.
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The recent financial results for Mizuho Financial Group demonstrate a meaningful inflection point. Rising policy rates in Japan, as the Bank of Japan exits its negative interest rate policy, have materially expanded Mizuho’s net interest margin (NIM) and net interest income (NII). In 1H FY2025 (April-September 2025), NII rose by about 35%—¥170 billion higher to ¥653 billion—driven by a 20 basis-point increase in the domestic loan-deposit margin, now at ~1.05%. Profit attributable to owners surged ~22% to ¥690 billion. Management responded by increasing its FY2025 net income guidance from ¥940 billion to ¥1.02 trillion.
Simultaneously, Mizuho is pursuing an aggressive clean-up strategy. It removed ¥310 billion of NPLs in this period, which lowered its NPL ratio from 0.97% to 0.72%—a signal to investors that it is confronting credit drag head-on. However, that clean-up came at cost: credit-related costs jumped ~120% to ¥32.4 billion.
On the risk side, domestic deposit balances declined by ¥1.7 trillion, with Financial & Government Institutions withdrawing roughly ¥1.34 trillion. This suggests clients are moving to higher yielding cash alternatives—bad news for funding margins. Moreover, international trading income from overseas fell notably; non-core revenue sources are volatile and could weigh on total income. Operational expenses rose 10.1%, outpacing profit growth in many categories.
Compared to its megabank peers, Mizuho remains #3 in size, behind Mitsubishi UFJ (MUFG) and Sumitomo Mitsui (SMFG), and is often ranked lower in performance metrics like return on equity, cost efficiency, and nonperforming loan ratios. Yet it is showing signs of re-rating potential, particularly given growth in NII driven by tightening rates, and has raised its targets.
Strategic implications: investors who seek exposure to Japan’s financial sector cycle would view Mizuho as a “turnaround sleeper”—not flashy, but potentially mispriced relative to some expectations. Key variables to monitor include BOJ rate policy, yen fluctuations (for international revenue), credit cost trends (especially in domestic loan book), and stability of deposit base. Open questions include: how much of the margin expansion is sustainable versus transitory? Can expense and deposit costs be controlled? What is the counterparty risk in overseas and non-core operations?
Supporting Notes
- 1H FY2025 consolidated NII rose ~35%, by ¥170 billion to ¥653 billion; domestic loan/deposit margin increased ~20bps to ~1.05% for Mizuho Bank.
- Profit attributable to owners in first half FY2025 reached ¥690 billion (≈ +22% YoY); full-year net income guidance raised from ¥940 billion to ¥1.13 trillion (some sources say ¥1.02 trillion) for FY ending March 31, 2026.
- NPL ratio dropped from 0.97% to 0.72% via ¥310 billion in nonperforming loans eliminated; but credit-related costs jumped ~120% to ¥32.4 billion.
- Domestic deposits declined by ~¥1.7 trillion overall, with ~¥1.34 trillion from Financial & Government Institutions.
- International trading income fell by ¥107 billion, hurting non-core revenue; overall ordinary income declined ~5.4%.
- Mizuho ranked 6th among Japan’s top lenders (out of 50) by performance, behind MUFG and SMFG on metrics like ROAE, NIM, cost-to-income, etc.
- Mizuho’s forecasts depend heavily on further BOJ rate hikes; it estimated additional ¥120 billion yearly NII per 25bps increase.