Summary Results for the First Quarter of FY2009
Summary of Income Analysis
Consolidated Net Business Profits
Consolidated Gross Profits for the three months ended Jun 30, 2009 increased by JPY 59.9 billion on a year-on-year basis to JPY 483.7 billion.
Gross Profits of the banking subsidiaries increased by JPY 49.0 billion on a year-on-year basis, due to an increase in income derived from flexible and timely operations in the Trading segment and other factors partly offset by a decrease in income from Customer Groups mainly due to a decline in deposit income reflecting the drop in market interest rates. G&A expenses remained almost flat due to our overall cost reduction efforts, despite an approximately JPY 9.0 billion increase in expenses associated with employee retirement benefits.
Aggregated consolidated Gross Profits (Net Operating Revenues) of our two securities subsidiaries (Mizuho Securities* and Mizuho Investors Securities) increased by JPY 48.6 billion on a year-on-year basis, mainly due to, in addition to an increase in commission income, the effect of the merger with Shinko Securities.
- *Our financial results for the first quarter of fiscal 2008 did not include Net Operating Revenues of Shinko Securities (JPY 32.3 billion), since Shinko Securities was an affiliate under the equity method of our group at that time.
As a result, Consolidated Net Business Profits amounted to JPY 160.1 billion, a year-on-year increase of JPY 33.0 billion.
| 1Q of FY2009 (Apr 1 to Jun 30, 2009) | Change from 1Q of FY2008 | |
|---|---|---|
| Consolidated Gross Profits | 483.7 | 59.9 |
| Consolidated Net Business Profits *1 | 160.1 | 33.0 |
| Credit-related Costs | -76.0 | -71.2 |
| Net Gains (Losses) related to Stocks | -19.8 | -45.3 |
| Ordinary Profits | -15.1 | -98.9 |
| Net Income | -4.4 | -137.4 |
| Net valuation gains (losses) related to hedging transactions*2 | -88.0 | -57.2 |
| Net extraordinary gains due to the merger of the securities companies | 19.8 | 19.8 |
- *1Consolidated Gross Profits - General and Administrative Expenses (excluding Non-Recurring Losses) + Equity in Income from Investments in Affiliates and certain other consolidation adjustments
- *2Credit derivatives for credit risk hedging purposes + equity derivatives
Consolidated Net Income
Consolidated Net Income for the three months ended Jun 30, 2009 amounted to JPY -4.4 billion, a year-on-year decrease of JPY 137.4 billion.
Consolidated Credit-related Costs amounted to JPY 76.0 billion, and Credit Cost Ratio of the 3 Banks was 35bps*, an improvement from 69bps for the full fiscal 2008.
- *Credit-related Costs for the first quarter of fiscal 2009 × 4 / Total claims under the Financial Reconstruction Law as of Jun 30, 2009 (aggregated amount of banking account and trust account)
The total P&L impact of the global financial market turmoil for our group for the first quarter of fiscal 2009 stayed at a loss of approximately JPY 8.0 billion.
As for credit and equity derivatives transactions entered into for hedging purposes at the banking subsidiaries, we recognized valuation losses related to such hedging transactions due to improvements in the credit and stock markets during the first quarter of fiscal 2009.
- -Losses on credit derivatives for credit risk hedging purposes: JPY -60.6 Bn
- -Losses on equity derivatives: JPY -27.3 Bn
Net Extraordinary Gains on our consolidated basis in connection with the consummation of the merger between Mizuho Securities and Shinko Securities in May 2009 amounted to JPY 19.8 billion (negative goodwill incurred profits associated with the merger of these securities companies and other factors.
| 1Q of FY2009 (Apr 1 to Jun 30, 2009) | Change from 1Q of FY2008 | |
|---|---|---|
| Gross Profits | 390.6 | *49.0 |
| G&A Expenses (excluding Non-Recurring Losses) |
-227.1 | -0.3 |
| Net Business Profits | 163.5 | 48.7 |
| Credit-related Costs | -66.6 | -64.0 |
| Net Gains (Losses) related to Stocks | -17.8 | -39.3 |
| Ordinary Profits | -20.5 | -60.4 |
| Net Income | 5.2 | -119.9 |
- *Includes impact on banking subsidiaries (JPY 45.0 billion, eliminated on a consolidated basis) of a change in the recipients of dividend payments under our schemes for capital raising through issuance of preferred debt securities by SPCs
Enhancement of Profitability
Net Interest Income
The average loan balance for the first quarter of fiscal 2009 increased by JPY 0.4 trillion from the second half of fiscal 2008.
The domestic loan-and-deposit rate margin for the same period increased at Mizuho Corporate Bank. Meanwhile, the aggregate figure of domestic operations decreased slightly by 0.02% from that for the first quarter and for the fourth quarter of fiscal 2008, respectively, as shown on the graph below.
As a result, Net Interest Income on a consolidated basis for the first quarter of fiscal 2009 increased by JPY 27.6 billion on a year-on-year basis to JPY 281.1 billion.
- Loan Balance
- *1Aggregate 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 the first quarter of fiscal 2009 increased by JPY 0.2 billion on a year-on-year basis to JPY 62.0 billion.
As for our business with individual customers, fee income associated with sales of investment trusts and individual annuities for the first quarter of fiscal 2009 decreased on a year-on-year basis, due to stagnant stock market conditions and other factors.
As for our business with corporate customers on the other hand, fee and commission income from solution-related business increased on a year-on-year basis.
- Net Fee and Commission Income
Financial Soundness
With respect to our financial soundness, although our NPL Ratio increased by 0.13% from Mar 31, 2009, it remained at a low level of 1.90%.
Unrealized Gains (Losses) on Other Securities improved by JPY 594.6 billion from Mar 31, 2009.
We will announce the Capital Adequacy Ratio (as of Jun 30, 2009) at a later date.
(JPY Bn, %)
| Jun 30, 2009 | Change from Mar 31, 2009 | |
|---|---|---|
| Net Deferred Tax Assets (DTAs) (Consolidated) |
637.4 | -77.2 |
| Disclosed Claims under the Financial Reconstruction Law (3 Banks) | 1,443.3 | 58.5 |
| NPL Ratio | 1.90% | 0.13% |
| Unrealized Gains (Losses) on Other Securities (Consolidated)*1 | 22.2 | 594.6 |
- *1The base amount to be recorded directly to Net Assets after tax and other necessary adjustments.
For Floatig-rate Japanese Govemment 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 since fiscal 2008.
The total balance of securitization products and details as of Jun 30, 2009 are shown in the table below.
| Jun 30, 2009 *2 | |
|---|---|
| Foreign currency denominated RMBS, ABSCDO |
601 (36) 251 (1) |
| Yen denominated | 2,557 (143) |
| Securitization Products | 3,159 (179) |
- *2Figures in brackets are the balances of Mizuho Securities including its overseas subsidiaries (all of which are held in trading accounts)
Disciplined Capital Management
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" in order to prepare for a further adverse business environment.
More specifically, our medium-term target is to increase our consolidated Tier 1 capital ratio to 8% level, and we aim to maintain our prime capital at a level of more than half of our Tier 1 capital.
Increase of our prime capital
In Jul 2009, we decided to issue common stock (the number of shares to be issued (maximum): 3 billion shares, total amount to be paid (maximum): JPY 529.2 billion) for the purpose of increasing 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 in the amount of JPY 139.5 billion in Jun 2009 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.
Meanwhile, we made a full redemption of JPY 176.0 billion of preferred debt securities which became redeemable at the issuer’s option in Jun 2009.
- *We may issue additional preferred debt securities through overseas special purpose subsidiaries in the near future.
We continue to pursue "disciplined capital management", optimally balancing "strengthening of stable capital base" and "steady returns to shareholders" in accordance with changes in the business environment, our financial condition or other factors.
(As of Jul 31, 2009)
This immediate release 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; changes in interest rates; foreign currency fluctuations; decrease in the market liquidity of our assets; revised assumptions or other changes related to our pension plans; a decline in our deferred tax assets; the effect of financial transactions entered into for hedging and other similar purposes; failure to maintain required capital adequacy ratio levels; downgrades in our credit ratings; the effect of changes in general economic conditions in Japan and elsewhere; our ability to avoid reputational harm; and the effectiveness of our operational, legal and other risk management policies.
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 most recent annual report on Form 20-F filed with the U.S. Securities and Exchange Commission ("SEC"), which is 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.
Definition
3 Banks: Aggregate figures for Mizuho Bank, Mizuho Corporate Bank and Mizuho Trust & Banking on a non-consolidated basis.
