Message from the Group CEO
(Translation from the Japanese Interim Review 2022)
In fiscal 2022, the challenging economic and social environment persisted, with the Russia-Ukraine situation and worldwide inflation causing market turmoil and weakening the yen. At Mizuho, we mobilized functions across the group to address such social issues as they arose. In tandem, we also implemented our business improvement plan responding to the series of IT system failures that began in February 2021, endeavoring to ensure stable business operations.
Interim results for fiscal 2022
Our Consolidated Net Business Profits for the first half of fiscal 2022 came to JPY 449.4 billion, for a progress rate of 52% towards our fiscal year target of JPY 860 billion. The acceleration of interest rate hikes in the US, together with other concerns, created considerable obstacles in the business environment. Because of this, market divisions saw a decrease of JPY 40.9 billion, and customer divisions saw a weakening of both the capital market business internationally and the asset management-related business in Japan. However, there was also an expansion of income in areas such as deposits, accompanying the rising interest rates outside Japan, and lending to non-Japanese clients. These along with similar positive factors enabled the customer divisions to record the highest level of profits for interim results since the introduction of the in-house company system in fiscal 2016.
Profit Attributable to Owners of Parent was JPY 333.9 billion, down JPY 51.6 billion year-on-year, affected by unique factors including the absence of the JPY 66.0 billion in temporary tax effects that we had recorded in the first half of the previous fiscal year. The interim result represents a progress rate of 61% towards our fiscal year target of JPY 540 billion and was driven by revenue from our core business. Our Common Equity Tier 1 (CET1) Capital Ratio* was at 9.2%, remaining within the lower end of the 9 – 10% range, the target we set in our 5-Year Business Plan.
We are maintaining our fiscal 2022 estimate for Consolidated Net Business Profits of JPY 860 billion and for Profit Attributable to Owners of Parent of JPY 540 billion. As we are increasingly confident that we will meet our fiscal year target for Profit Attributable to Owners of Parent, we have decided to raise our annual dividend by JPY 5 above our initial estimate, bringing the amount to JPY 85. This is in line with our shareholder return policy, which aims for a dividend payout ratio of 40% as a guide, and is the second raise to the annual dividend in two years.
Our capital management policy pursues the optimum balance between capital adequacy, growth investment, and enhancement of shareholder returns. Under this policy and in light of our CET1 Capital Ratio staying within the lower end of the 9 – 10% range as in our target, we will continue to strike a balance between our growth investment, reinforcing our business and people, and our shareholder returns.
(* Basel III finalization fully effective basis. Excluding Net Unrealized Gains (Losses) on Other Securities.)
Profit Attributable to Owners of Parent
Consolidated Common Equity Tier 1 (CET1) Capital Ratio
* Excluding Net Unrealized Gains (Losses) on Other Securities. Including the effect of partially fixing unrealized gains on Japanese stocks through hedging transactions. The denominator is calculated by excluding risk-weighted assets (RWA) associated with Net Unrealized Gains (Losses) on Other Securities (stocks). The capital floor is calculated after deducting the associated reserves from RWA using the standardized approach.
Progress on the 5-Year Business Plan
Our 5-Year Business Plan covers the years from fiscal 2019 to fiscal 2023 and puts forth structural reforms in the three areas of business, finance, and corporate foundations.
Regarding our finances, comparing our fiscal 2018 results against our fiscal 2022 outlook, our Consolidated Net Business Profits have grown from JPY 408.3 billion to JPY 860 billion, and our Consolidated ROE has improved from 1.2% to 6.4%.
The business side has also seen a number of developments. In our retail banking operations in Japan, we have been promoting comprehensive asset management consulting for an era of longer lifespans through collaboration between Mizuho Bank, Mizuho Trust & Banking, and Mizuho Securities. Going forward we will be able to meet an even wider range of customer needs through our capital and business alliance with Rakuten Securities, which we announced in October 2022. We have been producing steady results in co-creating value by sharing risk with our corporate clients and in shifting to an integrated banking and securities model across our global operations. In the field of sustainability transformation, we have been engaging with our clients to better assist them with their challenges. We have also set a transition investment budget and begun offering sustainable supply chain finance, the latter of which is a first for a Japanese bank. These are just two examples of the ways we are establishing new sustainable business. We concluded the first investment agreement under our transition investment budget in December 2022, and we are continuing to support our clients in improving their corporate value while co-creating social value together with them.
To lay the foundation for the coming era and farther future, we are consolidating the consulting and digital functions of Mizuho Research & Technologies and Mizuho-DL Financial Technology. We will take our sustainability transformation to a higher level as part of efforts to achieve a sustainable society, and at the same time also move forward on digital transformation. This will create a virtuous cycle through which Mizuho will grow alongside our customers and society. On the topic of digital transformation, we have been steadily advancing specific initiatives for co-creation beyond the boundaries of finance, and we are beginning to see results from them. Examples include our involvement in the House Coin digital payment service, smart cities, and smart agriculture.
Turning to corporate foundations, I see corporate culture, human resources approaches and frameworks, and productivity improvements as interconnected parts of a single whole. We are moving ahead on transforming our culture towards becoming an organization where everyone can take initiative and engage in constructive communication. Based on a suggestion from one of our employee-driven working groups, in December 2022 we appointed a Chief Culture Officer to lead cultural transformation and enhance communication across Mizuho, in doing so further strengthening our group-wide framework for cultural transformation. Additionally, we are transitioning to a new HR framework that will feature greater integration across Mizuho Bank, Mizuho Trust & Banking, Mizuho Securities, Mizuho Research & Technologies, and Mizuho Financial Group. Our aims in doing this are to extend our strengths as a unified group, enable our employees to reach their full potential, and foster seamless collaboration within our workforce. To improve productivity, we are streamlining our operations with digital transformation and pursuing supportive working environments.
For stable business operations, we fully implemented all of the measures under our business improvement plan by the end of September 2022, as scheduled. We have certainly improved our ability to maintain stable operation of IT systems and respond to system failures when they occur. Preventing incidents is something that requires steadfast commitment, and as such we are continuing to reinforce our frameworks to ensure the necessary measures remain embedded in our organization and are consistently applied.
Towards a sustainable future
Currently, international political and economic decoupling is impacting prices and the financial environment, leading to significant changes and growing uncertainty in the business environment around us. Simultaneously, the movement for a sustainable society is gaining greater momentum. Mizuho's key role is to take these changes as an opportunity, connect Japan's advanced technology and insights with the rest of the world, and co-create the future to achieve a sustainable society.
Aiming to fulfill this role, our employees and executive officers share a common vision for what Mizuho should be for society and the economy, and we are in the process of revising our Corporate Identity to serve as a foundation for the future. We are also reviewing our business portfolio and reexamining our focus areas.
In the midst of this era of uncertainty, we will exercise appropriate risk control while facilitating our clients' and society's transformation to prepare for the world 10 or 20 years from now. Doing so will enable us to secure continuous growth. We appreciate your continued support and will do everything in our power to exceed your expectations.
Member of the Board of Directors
President & Group CEO
Mizuho Financial Group, Inc.