Summary Results for FY2008
Summary of Income Analysis
Consolidated Net Business Profits
Consolidated Gross Profits for fiscal 2008 increased by JPY 146.0 billion on a year-on-year basis, due to the recovery in performance of Mizuho Securities which had recorded significant losses for the previous fiscal year.
Gross Profits of the banking subsidiaries decreased mainly because of decreases in income related to business with domestic corporate customers (SMEs), fee income associated with sales of investment trusts and individual annuities, fee and commission income from overseas business which was affected by the turmoil in the global financial markets, and income from the trust and asset management business of Mizuho Trust & Banking which was affected by domestic real estate market conditions.
Consolidated Net Business Profits increased by JPY 111.4 billion to JPY 622.6 billion compared with the previous fiscal year, despite an increase in G&A Expenses, mainly those associated with employee retirement benefits.
Consolidated Net Income
Consolidated Net Income for fiscal 2008 amounted to JPY -588.8 billion, a year-on-year decrease of JPY 900.0 billion. This was primarily due to, in addition to the aforementioned factors, an increase in both domestic and overseas Credit-related Costs mainly against the backdrop of the sharp economic downturn as well as the conservative provision of reserves in light of the unforeseeable future of the economic environment, the recording of one-time losses associated with the sharp declines in both domestic and overseas stock prices (JPY 514.1 billion of devaluation of stocks for the 3 Banks; of which JPY 418.5 billion was recorded in the second half), continuously recorded losses on securitization products and others resulting from the global financial market turmoil, and the effect of conservative estimates of future profits in relation to the calculation of deferred income taxes.
As for the effect from our securitization products and others due to the global financial market turmoil, the consolidated P&L impact in fiscal 2008 was a loss of approximately JPY 135.0 billion.
| 3 Banks | Losses on sales of securitization products, etc. (incl. devaluation) (of which foreign currency denominated*1) |
approx. JPY -126.0 Bn (approx. JPY -101.0 Bn) |
|---|---|---|
| Net losses on provision of Reserve for Possible Losses on Sales of Loans*2 | approx. JPY -12.0 Bn | |
| Provision of Reserve for Contingencies associated with ABCP Programs | approx. JPY -4.0 Bn | |
| Profits from hedging by CDS | approx. JPY 23.0 Bn | |
| Mizuho Securities*3 | Trading losses on securitization products (of which foreign currency denominated) |
approx. JPY -16.0 Bn (approx. JPY -12.0 Bn) |
- *1For the vast majority of foreign currency denominated securitization products, we applied reasonably calculated prices based on the reasonable estimates of our management as fair value at the end of fiscal 2008. (P&L impact: approx. JPY +107.0 Bn).
- *2Separately recorded approximately JPY -19.0 billion of Credit-related Costs in fiscal 2008 due to downgrading of some obligors to the Intensive Control Obligors classification or below.
We reclassified a part of Loans Held for Sale as loans other than Loans Held for Sale, based on the reasonably calculated prices, at the end of Dec 2008. - *3Excludes reserves for counterparty risks associated with the estimated amount claimable for the settlement of the CDS related to securitization products described in "(Reference) Credit Default Swaps related to securitization products (as of Mar 31, 2009)" on page 2-6 of [Reference] Summary of the impact of the dislocation in the global financial markets on our foreign currency denominated exposures (the group in total) (PDF/141KB)
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| FY2008 | Change from FY2007 | |
|---|---|---|
| Consolidated Gross Profits | 1,806.9 | 146.0 |
| Consolidated Net Business Profits * | 622.6 | 111.4 |
| Credit-related Costs | -536.7 | -453.6 |
| Net Gains (Losses) related to Stocks | -400.2 | -653.5 |
| Ordinary Profits | -395.1 | -792.2 |
| Net Income | -588.8 | -900.0 |
- *Consolidated Gross Profits - General and Administrative Expenses (excluding Non-Recurring Losses) + Equity in Income from Investments in Affiliates and certain other consolidation adjustments
| FY2008 | Change from FY2007 | |
|---|---|---|
| Gross Profits | 1,485.9 | -235.8 |
| G&A Expenses (excluding Non-Recurring Losses) |
-909.3 | -49.1 |
| Net Business Profits | 576.6 | -285.0 |
| Credit-related Costs | -539.3 | -446.7 |
| Net Gains (Losses) related to Stocks | -444.2 | -684.4 |
| Ordinary Profits | -520.2 | -1,192.6 |
| Net Income | -576.9 | -770.5 |
Net Interest Income
The average loan balance for the first half and the second half of fiscal 2008 increased respectively, mainly driven by the growth in the balance of domestic branches.
Although the domestic loan-and-deposit rate margin for the second half of fiscal 2008 was 1.46%, an improvement on the first half mainly enhanced by increased margins at Mizuho Corporate Bank, the figure for the full fiscal year remained almost flat on a year-on-year basis.
Net Interest Income of the 3 Banks for fiscal 2008 amounted to JPY 968.8 billion (a year-on-year increase of JPY 14.8 billion) due to the growth in our international operations, while that in our domestic operations slightly declined due to factors including decreased returns on securities.
- Loan Balance
- *Aggregate average balance of the 3 Banks for the period, excluding Trust Account and loans to Mizuho Financial Group, Inc. Balance for overseas branches includes foreign exchange translation impact.
- *2Aggregate figures of domestic operations of Mizuho Bank and Mizuho Corporate Bank after excluding loans to Mizuho Financial Group, Inc., Deposit Insurance Corporation of Japan and the Japanese Government.
Non-Interest Income
Net Fee and Commission Income of the 3 Banks for fiscal 2008 decreased to JPY 299.2 billion by JPY 52.5 billion compared with the previous fiscal year.
As for our business with individual customers, fee income associated with sales of investment trusts and individual annuities was significantly lower than that in the previous fiscal year, due to stagnant stock market conditions and other factors.
As for our business with corporate customers, although fee and commission income associated with domestic syndicated loans increased year-on-year, that primarily from solution-related business for SMEs, foreign exchange business, and overseas business decreased. Profits from trust and asset management business of Mizuho Trust & Banking also decreased.
- Net Fee and Commission Income
Financial Soundness
Although our NPL Ratio was 1.77%, an increase on a year-on-year basis, our Net NPL Ratio, reflecting the effects of Reserves for Possible Losses on Loans, remained at a low level of 0.73% (a year-on-year decrease of 0.10%). We maintained sufficient financial soundness.
We recorded Unrealized Losses on Other Securities due to the declines in the stock markets.
We maintained our Consolidated BIS Capital Adequacy Ratio at above the 10% level as of Mar 31, 2009. We have applied the Advanced Internal Ratings-Based (AIRB) Approach to the measurement of credit risk from Mar 31, 2009.
(JPY Bn)
| Mar 31, 2009 | Change from Mar 31, 2008 | |
|---|---|---|
| Consolidated Capital Adequacy Ratio (Total Risk-based Capital) |
10.53% (6,223.6) |
-1.17% (-1,484.6) |
| Tier 1 Capital Ratio (Tier 1 Capital) |
6.37% (3,765.0) |
-1.03% (-1,115.1) |
| Net Deferred Tax Assets (DTAs) (Consolidated) |
714.6 | 118.1 |
| Net DTAs / Tier 1 Ratio | 18.9% | 6.7% |
| Disclosed Claims under the Financial Reconstruction Law (3 Banks) | 1,384.7 | 181.5 |
| NPL Ratio (Net NPL Ratio *1) |
1.77% (0.73%) |
0.15% (-0.10%) |
| Unrealized Gains (Losses) on Other Securities (Consolidated) *2 | -572.3 | -1,213.0 |
- *1(Disclosed Claims under the Financial Reconstruction Law - Reserves for Possible Losses on Loans) / (Total Claims - Reserves for Possible Losses on Loans) X 100
- *2The base amount to be recorded directly to Net Assets after tax and other necessary adjustments.
For Floating-rate Japanese Government Bonds and the vast majority of foreign currency denominated securitization products, we applied reasonably calculated prices based on the reasonable estimates of our management as fair value at the end of fiscal 2008.
The total balance of securitization products and details as of Mar 31, 2009 are shown in the table below.
| Mar 31, 2009 *3 | |
|---|---|
| Foreign currency denominated RMBS, ABSCDO |
JPY 0.6 Tn (JPY 39 Bn) JPY 0.2 Tn (JPY 7 Bn) |
| Yen denominated | JPY 2.7 Tn (JPY 188 Bn) |
| Securitization Products | JPY 3.3 Tn (JPY 227 Bn) |
- *3Figures in brackets are the balances of Mizuho Securities including its overseas subsidiaries (all of which are held in trading accounts)
Disciplined Capital Management
We are pursuing "strengthening of stable capital base" and "steady returns to shareholders" as our "disciplined capital management". In Jul 2008, we repurchased our own shares (common shares) of JPY 150.0 billion and cancelled almost all of them in Sep 2008 for the purpose of offsetting the potential dilutive effect of our common shares from the conversion of the Eleventh Series Class XI Preferred Stock.
However, in light of factors including the current financial market turmoil and global economic downturn, we have been putting more priority on "strengthening of stable capital base" since the second half of fiscal 2008 in order to prepare for a further adverse business environment. We will continue to focus on strengthening our capital base as the current management priority since it has become increasingly important for financial institutions to maintain sufficient capital base amid a prolonged stagnation of both domestic and overseas economies.
Increase of our prime capital
Our board of directors resolved today to file a Shelf Registration Statement (hakkotorokusho) for the issuance of our common shares up to JPY 600.0 billion. The registration is to establish a framework for flexibly implementing the issuance of our common shares that will serve to increase our prime capital. Our decision is aimed at, in light of the current uncertainty over the economy, securing a solid and sufficient capital buffer in preparation for a further adverse business environment and ensuring the flexibility to capture business opportunities leading to our future growth and to respond to customer needs.
Strengthening of our capital base through issuance of "non-dilutive" preferred securities
We issued preferred debt securities amounted at JPY 303.0 billion in Jul 2008, JPY 355.0 billion in Dec 2008, and USD 850 million in Feb 2009, respectively, through our overseas special purpose subsidiaries, so as to further increase our group's capital base in light of the current financial market turmoil on top of securing the agility and improving the flexibility of our capital strategy.
In addition, our board of directors resolved today to establish overseas special purpose subsidiaries and to issue preferred debt securities. Meanwhile, we plan to make a full redemption of preferred debt securities (JPY 176.0 billion) which will become redeemable at the issuer's option in Jun 2009.
(As of May 15, 2009)
This page contains statements that constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, including estimates, forecasts, targets and plans. Such forward-looking statements do not represent any guarantee by management of future performance.
In many cases, but not all, we use such words as "aim," "anticipate," "believe," "endeavor," "estimate," "expect," "intend," "may," "plan," "probability," "project," "risk," "seek," "should," "strive," "target" and similar expressions in relation to us or our management to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions.
We may not be successful in implementing our business strategies, and management may fail to achieve its targets, for a wide range of possible reasons, including, without limitation, incurrence of significant credit-related costs; declines in the value of our securities portfolio, including as a result of the impact of the dislocation in the global financial markets stemming from US subprime mortgage loan issues; changes in interest rates; foreign currency fluctuations; revised assumptions or other changes related to our pension plans; failure to maintain required capital adequacy ratio levels; downgrades in our credit ratings; the effectiveness of our operational, legal and other risk management policies; our ability to avoid reputational harm; and effects of changes in general economic conditions in Japan and elsewhere.
Further information regarding factors that could affect our financial condition and results of operations is included in "Item 3.D. Key Information - Risk Factors," and "Item 5. Operating and Financial Review and Prospects" in our latest annual report on Form 20-F filed with, and in our report on Form 6-K dated Feb 13, 2009 furnished to, the U.S. Securities and Exchange Commission ("SEC") which are available in the Financial Information section of our web page at www.mizuho-fg.co.jp/english/index.html and also at the SEC's web site at www.sec.gov.
We do not intend to update our forward-looking statements. We are under no obligation, and disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by the rules of the Tokyo Stock Exchange.
