Summary Results for the Second Quarter of FY2009
Summary of Income Analysis
Consolidated Net Business Profits
Consolidated Gross Profits for the first half of fiscal 2009 increased by JPY 87.8 billion on a year-on-year basis to JPY 1,005.1 billion.
Gross Profits of the banking subsidiaries amounted to JPY 790.6 billion, 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 decreased by JPY 4.2 billion on a year-on-year basis to JPY 452.3 billion due to our overall cost reduction efforts, despite a year-on-year increase of JPY 18.6 billion 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 103.4 billion on a year-on-year basis to JPY 168.6 billion, 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 half of fiscal 2008 did not include the income of Shinko Securities (Net Operating Revenues of JPY 55.2 billion and Ordinary Profits of JPY 0.2 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 359.5 billion, a year-on-year increase of JPY 42.0 billion.
| 1H of FY2009 (Apr 1 to Sep 30, 2009) | Change from 1H of FY2008 | |
|---|---|---|
| Consolidated Gross Profits | 1,005.1 | 87.8 |
| Consolidated Net Business Profits *1 | 359.5 | 42.0 |
| Credit-related Costs | -161.7 | -18.9 |
| Net Gains (Losses) related to Stocks | 20.2 | 59.8 |
| Ordinary Profits | 103.7 | 47.0 |
| Net Income | 87.8 | -6.7 |
| Net valuation gains (losses) related to hedging transactions *2 | -105.8 | -112.5 |
| 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
- *2Equity derivatives + credit derivatives for credit risk hedging purposes (of which JPY -88.0 billion was recognized for the first quarter)
Consolidated Net Income
Consolidated Net Income for the first half of fiscal 2009 amounted to JPY 87.8 billion, a year-on-year decrease of JPY 6.7 billion.
Consolidated Credit-related Costs amounted to JPY 161.7 billion, and Credit Cost Ratio of the 3 Banks was 32bps*, an improvement from 69bps for the full fiscal 2008.
- * Credit-related Costs for the first half of fiscal 2009 x 2 / Total claims under the Financial Reconstruction Law as of Sep 30, 2009 (aggregated amount of banking account and trust account)
The total P&L impact on our group of the global financial market turmoil for the first half of fiscal 2009 was limited to a loss of approximately JPY 3.0 billion.
Net Gains related to Stocks amounted to JPY 20.2 billion as a consequence of recording Gains on Sales in our efforts to reduce our stock portfolio despite recording losses in the amount of JPY 29.0 billion on equity derivatives entered into for hedging purposes at the banking subsidiaries.
As for credit derivatives transactions entered into for credit risk hedging purposes at the banking subsidiaries, we recognized valuation losses of JPY 76.8 billion related to such hedging transactions due to the improvement in the credit markets.
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).
| 1H of FY2009 (Apr 1 to Sep 30, 2009) | Change from 1H of FY2008 | |
|---|---|---|
| Gross Profits *1 | 790.6 | 24.9 |
| G&A Expenses (excluding Non-Recurring Losses) | -452.3 | 4.2 |
| Net Business Profits | 338.3 | 29.2 |
| Credit-related Costs *2 | -116.9 | 13.5 |
| Net Gains (Losses) related to Stocks | 24.1 | 64.8 |
| Ordinary Profits | 94.5 | 84.7 |
| Net Income | 128.1 | -41.2 |
- *1Includes impacts 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
- *2Includes impact of a review of the calculation method for reserve for possible losses on loans guaranteed by our credit guarantee subsidiary (JPY 26.8 billion, eliminated on a consolidated basis)
Net Interest Income
The average loan balance for the first half of fiscal 2009 increased by JPY 0.9 trillion on a year-on-year basis, while it decreased by JPY 1.3 trillion compared with the second half of fiscal 2008 mainly due to a decrease of JPY 1.1 trillion in loans to Deposit Insurance Corporation of Japan and the Japanese Government.
The domestic loan-and-deposit rate margin for the same period increased by 0.15% at Mizuho Corporate Bank from that for the first half of fiscal 2008. Meanwhile, the aggregate figure of domestic operations decreased slightly by 0.03% from that for the first half of fiscal 2008, as shown on the graph below.
Net Interest Income on a consolidated basis for the first half of fiscal 2009 increased by JPY 57.6 billion on a year-on-year basis to JPY 581.0 billion, with an increase in Net Interest Income in the Trading segment.
- 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 half of fiscal 2009 amounted to JPY 136.0 billion, a year-on-year decrease of JPY 10.3 billion.
This was primarily due to, in a business environment where the impact of the financial market turmoil still remained on the real economy, a decrease in fee and commission income from solution-related business and overseas business with corporate customers as well as a decrease in profits from trust and asset management business of Mizuho Trust & Banking.
Meanwhile, as for our business with individual customers, fee income associated with sales of investment trusts and individual annuities for the first half of fiscal 2009 increased from that for the second half of fiscal 2008.
- Net Fee and Commission Income
Financial Soundness
With respect to our financial soundness, although our NPL Ratio increased by 0.24% from Mar 31, 2009, it remained at a low level of 2.01%.
Unrealized Gains (Losses) on Other Securities improved by JPY 732.6 billion from Mar 31, 2009 to JPY 160.2 billion.
Our Consolidated Capital Adequacy Ratio was 12.89%, an improvement of 2.36% from that as of Mar 31, 2009.
The total balance of securitization products and details as of Sep 30, 2009 are shown on Reference (PDF/91KB)
.
(JPY Bn)
| Sep 30, 2009 | Change from Mar 31, 2009 | |
|---|---|---|
| Consolidated Capital Adequacy Ratio (Total Risk-based Capital) |
12.89% (7,630.0) |
2.36% (1,406.3) |
| Tier 1 Capital Ratio (Tier 1 Capital) |
8.69% (5,147.4) |
2.32% (1,382.3) |
| Prime Capital Ratio *1 | 5.36% | 2.25% |
| Net Deferred Tax Assets (DTAs) (Consolidated) |
615.1 | -99.5 |
| Net DTAs / Tier 1 Ratio | 11.9% | -7.0% |
| Disclosed Claims under the Financial Reconstruction Law (3 Banks) | 1,431.2 | 46.4 |
| NPL Ratio | 2.01% | 0.24% |
| Unrealized Gains (Losses) on Other Securities (Consolidated) *2 | 160.2 | 732.6 |
- *1Prime Capital (Tier1 Capital - preferred securities - preferred stock (excluding mandatory convertible preferred stock)) divided by Risk-weighted Assets
- *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.
Disciplined Capital Management
In light of factors including the recent 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. As of Sep 30, 2009, our consolidated Tier 1 capital ratio and our prime capital ratio were 8.69% and 5.36%, respectively.
Increase of our prime capital
In the first half of fiscal 2009, we issued common stock (the number of shares issued: 3 billion shares, total amount paid: 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 amounted at JPY 139.5 billion in Jun 2009, JPY 72.5 billion in Aug 2009, and JPY 25.0 billion in Sep 2009 through our overseas special purpose subsidiary, so as to further increase our group's capital base in light of the recent 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.
Conversion of mandatory convertible preferred stock into common stock
During the first half of fiscal 2009, the number of shares of our common stock increased by 1,002 million through requests for conversion of 317 million shares (JPY 317.6 billion) of Eleventh Series Class XI Preferred Stock. The outstanding balance of such preferred stock as of Sep 30, 2009 was JPY 594.2 billion.
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, and in light of on-going global discussions on capital.
(As of Nov 13, 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.
