Mizuho Financial Group Inc Earnings - Q1 2026 Analysis & Highlights
Mizuho Financial Group reported strong FY2025 earnings with normalized profit of ¥1,150 billion, positioning itself to capitalize on Japan's economic transformation through disciplined risk management, strategic business diversification, and ambitious growth targets while navigating geopolitical uncertainties.
Key Financial Results
Profit attributable to owners of parent was ¥1,248.6 billion for FY2025, with management recognizing this figure includes some one-time profits and estimating normalized earnings at approximately ¥1,150 billion.
Total payout ratio achieved 60% in FY2025, with the company maintaining a policy of targeting a total payout ratio of 50% or more going forward.
Return on Equity (ROE) on a normalized basis was 10.5% for FY2025, calculated using the ¥1,150 billion normalized profit figure.
Expense ratio recently dropped to 59.4%, demonstrating strict cost discipline despite absolute increases in expenses allocated to essential areas such as overseas governance, customer base strengthening, and human capital investment.
Risk-weighted assets increased from ¥78 trillion (end of March 2019) to ¥97 trillion, while Return on Risk-Weighted Assets (RORA) improved from 2.4% to 3.6%, showing continued focus on risk and return management.
Business Segment Results
Domestic and Global CIB gross profits increased by 17% year-on-year, with Investment Banking (IB) income growing steadily and loans to innovative companies increasing.
Global CIB gross profits increased steadily year-on-year with revenue growth across each product, and the business rose from 17th in FY2022 to 15th in FY2025 in global rankings.
Mass Retail gross profits increased by 11% year-on-year, with new accounts opened growing significantly by 26% in FY2025 and app Monthly Active Users (MAU) increasing by 13%.
For large corporates, product-related loans have grown significantly with IB income showing a CAGR of 24%, while for mid-cap companies, high return loans (¥1 billion or more with spreads of 100 basis points or more) have expanded significantly.
US business gross profit reached $5.2 billion with significantly deepened client relationships and an established solid product lineup.
Cross-border M&A involving Japan ranked second, a first for Mizuho, indicating positive results from the Greenhill acquisition.
Capital Allocation
Share buyback program initiated with ¥100 billion, with management indicating plans to flexibly increase this as the Middle East situation is monitored, though the company maintains its policy of targeting a total payout ratio of 50% or more.
Cross-shareholdings reduction of ¥114.6 billion achieved in fiscal year 2025, with sales already accepted bringing the total to ¥152.4 billion, representing 45% progress against the three-year target of ¥350 billion or more.
Deemed holdings reached ¥274.4 billion against a target of ¥200 billion, demonstrating substantial progress in reducing cross-shareholdings.
Senior notes of $7 billion issued by Mizuho Bank in early April at very favorable cost, and TLAC bonds issued in the previous fiscal year to increase mid-long term funding.
Mizuho Leasing stake reduced to comply with US BHC Act, while maintaining economic interest through subscription for special class shares to ensure the company secures sufficient capital and continues investing.
Orico stake reduced from 48.8% to 33.8% by selling 15% to Muninova to form a partnership for expanding lending business and reducing costs through digital technology, while maintaining essential credit perspective.
Industry Trends and Dynamics
Japan's structural challenges of prolonged deflation, cash-heavy household savings, weak domestic investment, and population decline are shifting, with a virtuous cycle of prices and wages emerging, retail financial investment increasing, and proactive corporate domestic investment stance developing.
Wage growth accelerated from 1.92% in the 2010s to plus 5%, demonstrating significant improvement in Japan's economic dynamics.
Ratio of risk assets in household portfolios increased from 15% in 2019 to 24% over the past six years, reflecting structural shift from savings to investment.
Foreign investment in Japanese equities stands at ¥7.8 trillion, indicating growing overseas interest in the Japanese market.
Domestic capital investment grew from ¥102 trillion in 2019 to ¥124 trillion in 2025, demonstrating increased corporate investment activity.
M&A volume increased from ¥18.0 trillion to ¥35.7 trillion, showing significant growth in corporate actions.
Outstanding loans grew from ¥315 trillion to ¥396 trillion, domestic bond issuance increased from ¥10.9 trillion to ¥15.6 trillion, and startup fundraising grew from ¥398.0 billion to ¥761.3 billion.
Percentage of companies with P/B ratio under 1 times decreased from 40% in 2019 to 24%, indicating improved corporate valuations.
Competitive Landscape
Mizuho possesses the only in-house global CIB among Japanese banks, providing a competitive advantage in global collaboration.
Mizuho maintains a 50-year history of industry research capabilities and strategic foresight, supporting clients' structural reforms through deep strategic dialogue.
Mizuho holds the position of number one debt house in public and corporate bond markets, demonstrating competitive strength in this segment.
Mizuho holds the top CIB track record among Asian financial institutions with net income exceeding ¥1 trillion.
CIB business is deeply rooted in Corporate Banking compared to US and European banks, where sales and trading constitutes a significant portion of revenue, providing better stability.
Mizuho keeps trading facilitation to an absolute minimum compared to US banks, with structurally low revenue volatility in overall business.
Macroeconomic Environment
Primary macro concern is the geopolitical situation in the Middle East, with attention focused on rising prices creating needs for securing liquidity and increasing credit facilities.
Corporate action momentum has not slowed significantly despite Middle East concerns, with many new M&A discussions ongoing.
Longer continuation of Middle East conflict could create various bottlenecks, with potential supply constraints that could significantly negatively impact corporate mindset if risks materialize.
Guidance of ¥1,300 billion does not take the Middle East situation into account and is full tilt, though downside risks must be closely monitored.
Possibility of US policy rate cuts has moved further away, though management is prepared to secure earnings even if policy rates decline.
Growth Opportunities and Strategies
Mizuho aims to organically connect four Focus Business Areas and functions to contribute to client self-dependency and indispensability, with emphasis on connecting large corporations with mid-cap companies and SMEs to strengthen supply chains.
Mizuho will foster new industries such as the space industry by connecting large corporations with startups.
Mizuho will serve as a bridge promoting international collaboration, connecting Japanese companies with overseas companies to build global semiconductor supply chains and connecting domestic and overseas startups in sustainability areas.
Family office business represents important growth area for innovative and mid-cap companies, providing comprehensive support for family businesses including business succession, asset succession, and asset management.
Transaction Banking business in Asia is a focus area with strong foundation built and revenues increasing.
Avendus acquisition in India is planned with close collaboration expected following regulatory approval.
AI is entering full scale implementation phase, with Mizuho identifying five target areas for substantial resource allocation and appointing AI leaders in each company, unit, and group to review processes and identify areas delegable to AI.
Asset Management One enhancement initiatives resulted in investment advisory field improvement, with share of funds with excess returns outperforming peers improving from 25% to 52% in FY2025.
Management target to cut approximately ¥150 billion in fixed costs over three years through process redesign suitable for AI and AI utilization to absorb natural attrition and reduce workload.
Financial Guidance and Outlook
FY2026 profit target of ¥1,300 billion, representing ambitious growth from the normalized FY2025 basis of ¥1,150 billion.
FY2028 ROE target of over 12%, assuming current policy rate of 0.75%, representing an ambitious target management believes is the minimum level necessary to catch up with US and European peers.
ROE would rise by approximately 0.6 to 0.7 percentage points for every 25 basis point rate hike, with direct increase in gross profit and some cost increases offsetting the benefit.
Impact of 25 basis point rate rise estimated at ¥120 billion, though actual impact may be slightly below this figure due to potentially higher costs for time deposits and other products.
CET1 ratio at 9.9% at end of March 2026, with profit attributable to owners of parent contributing 1.3 percentage point increase and 0.8 percentage points returned to shareholders.
JPY loan-to-deposit ratio around 50%, providing ample room for continued deposit growth efforts.
Foreign currency loans funded approximately 80% by foreign currency deposits, increased from basic stance of 70% from a liquidity perspective.
Average remaining period of JGB portfolio at 0.9 years and foreign bonds at 1.2 years, demonstrating cautious approach to interest rate risk.
Held-to-maturity foreign bonds built up to certain level to secure earnings even if policy rates decline.
Risk Management and Balance Sheet Strength
Loan portfolio is mainly investment grade both in Japan and outside Japan, supporting portfolio quality.
BDC exposure limited to approximately ¥300 billion with minimal downside considered.
Overseas real estate exposure not significant with China real estate exposure at approximately $600 million.
Management philosophy is to not take on risks that cannot be evaluated internally and not engage in transactions where risks cannot be controlled.
Conservative bond portfolio consistently maintained throughout the VUCA era.
Forward-looking provisions utilized as demonstrated in FY2025 to address uncertainty.
