Japan’s biggest banks unveiled plans to boost shareholder returns after posting bumper profits, thanks in part to a cheaper yen.
Mitsubishi UFJ Financial Group Inc. announced a $2.6 billion share buyback program on Tuesday after fiscal second-quarter profit tripled. Sumitomo Mitsui Financial Group Inc. raised its full-year net income forecast and said it plans to spend as much as 150 billion yen ($989 million) repurchasing stock. A day earlier, Mizuho Financial Group Inc. boosted its annual dividend guidance along with its earnings target.
The results reflect the benefits of the banks’ overseas expansions, which have allowed them to generate earnings that have increased in yen terms once repatriated home. Japan’s currency has slid about 25% in the past two years against the dollar.
Prospects at home are also set to improve if the central bank ends its seven-year negative interest-rate policy, which has crushed lending profitability. Shares of the lenders have surged this year in anticipation that the Bank of Japan will carry out such a move.
Sumitomo Mitsui raised its net income forecast for the year ending March 31 to 920 billion yen from 820 billion yen. Its profit rose 2% from a year earlier to 278.5 billion yen in the three months ended Sept. 30, according to calculations by Bloomberg based on six-month results released Tuesday.
MUFG’s net income tripled to 368.9 billion yen in the quarter. The increase was mostly due to the absence of losses booked last year in connection with its decision to sell a US banking unit.
Read more on MUFG’s results here and Sumitomo Mitsui’s here
Tokyo-based MUFG announced plans to repurchase up to 3.3% of its outstanding shares for as much as 400 billion yen.
For the first six months, MUFG earned 71% of its annual net income goal of 1.3 trillion yen. Still, the bank refrained from raising the target because of the risk that the yen may reverse its decline, Chief Executive Officer Hironori Kamezawa said at a briefing. MUFG may also adjust its holdings of foreign bonds that have valuation losses, he added.
An end to negative rates isn’t a done deal. Recent comments from Bank of Japan Governor Kazuo Ueda have suggested the central bank is in no rush to scrap the policy, although economists expect that to happen next year amid persistent inflation.
Mizuho raised its full-year profit forecast on Monday after first-half earnings were buoyed by gains in investment banking and trading, along with the weaker yen. Mizuho boosted its dividend guidance but refrained from announcing a share buyback.
Shares of MUFG closed 2.5% higher in Tokyo trading before the earnings were announced, taking this year’s gain to 44%, on course for their best performance in a decade. Sumitomo Mitsui rose 1.3%, and is up 35% this year.