Mizuho Financial Group, one of Japan's Big Four banks, yesterday sharply lifted its earnings forecast for the first fiscal half ending Sept. 30, citing a decline in bad loan write-off costs.
Mizuho, the world's biggest bank in terms of assets, expects a ?230 billion (US$2.1 billion) profit for the six-month period, up from ?100 billion (US$901 million) projected earlier.
Mizuho Financial Group kept the outlook for group operating revenue the same from the earlier projection in May of ?1.6 trillion (US$14 billion). Mizuho said it will release its earnings forecast for the full fiscal year through March when it announces interim results in November.
Mizuho shares have more than tripled since March on signs that Japan's economic recovery is gathering momentum, making it easier for borrowers to repay loans. Prime Minister Junichiro Koizumi last month reiterated his resolve to clean up US$384 billion of bad loans remaining at Mizuho and other lenders.
"Japanese bank stocks have become a leveraged play on the market and to an extent on the economy as a whole," said Jonathan Allum, Japan strategist at KBC Financial Products UK Ltd. in London. "The wind is blowing in the right direction. When it's good it's very good, when it bad it's horrid."
`This revision offers further confirmation for investors that Japan's banks are likely to return to profit in their current business year after two years of losses," said Nedeltcho Akov, a banking analyst at ING Securities Japan Ltd. in Tokyo.
Mizuho and other Japanese banks have pledged to turn into the black this year after posting massive losses over the past two or three years. The nation's recent economic recovery and the rise on the Tokyo stock exchange have helped the performance of Japan's banks, which have been struggling with loans gone sour.
Japan's economy has gradually recovered from a long slowdown in recent months.
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