Japan's five major banking groups expect to earn a combined 7.06 trillion yen in net profit in the year to March 2027, passing 7 trillion yen for the first time, after their first-half profit rose 22.4% from a year earlier to 3,954.2 billion yen, Jiji Press reported on Friday, citing the groups' earnings forecasts.

The total would be about 21% above the previous record of 5,835.1 billion yen set in fiscal 2025, which ended in March. For investors in Asia, the figures put a number on what rising Japanese interest rates are worth to the country's lenders. All five groups raised their full-year estimates, helped by higher lending rates after the Bank of Japan's gradual rate increases, according to Jiji. MUFG and Sumitomo Mitsui Trust also raised dividend forecasts and set new share buybacks, their statements show.

Megabanks supply most of the 7 trillion yen

The three largest groups account for the bulk of the total. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group together forecast 6.3 trillion yen, or about 89% of the five-group figure, their results statements show. Sumitomo Mitsui Trust Group and the fifth group in Jiji's tally make up the rest.

MUFG reported a record first-half net income of 1,630.8 billion yen on Friday, up 337.9 billion yen, or about 26%, from a year earlier. It raised its full-year target by 100 billion yen to 2.8 trillion yen. The group said rising yen interest rates added about 140 billion yen to the year-on-year change in net operating profit, which reached 1,617.4 billion yen. Its targets list a Bank of Japan policy rate of about 1.25% among the financial indicators behind them.

Sumitomo Mitsui Financial Group's net profit rose 7.5% to 1,003.2 billion yen, the first time it has topped 1 trillion yen in a fiscal first half, Jiji said. The group now forecasts 1.9 trillion yen for the full year, a 20.0% increase.

Mizuho posted the fastest growth of the three. Net profit rose 29.9% to 896.5 billion yen and ordinary profit climbed 47.3% to 1,252.3 billion yen. It lifted its full-year estimate to 1.6 trillion yen from 1.4 trillion yen, which would be a 28.1% rise on the prior year.

Sumitomo Mitsui Trust lifts forecast, adds buyback

Sumitomo Mitsui Trust Group, which reported a day earlier on Thursday, had the sharpest percentage gain among the four groups whose statements Capital Times reviewed. Net income attributable to owners of the parent rose 46.0% to 250.1 billion yen in the six months to Sept. 30, and ordinary profit jumped 85.4% to 364.3 billion yen.

The trust bank raised its full-year net income forecast to 420 billion yen from the 380 billion yen it gave in May, a 10.5% increase. That would be 32.3% above the 317.5 billion yen it earned in the prior year. The company cited strong results in every business segment and larger gains on stocks as it sells down strategic shareholdings, the long-held stakes in client companies that Japanese banks have been unwinding.

Those share sales matter for the quality of the profit. Sumitomo Mitsui Trust said it expects adjusted net income, which strips out after-tax gains from selling strategic shareholdings, of about 286 billion yen for the year. That leaves roughly 134 billion yen of the 420 billion yen forecast coming from stake sales.

Shareholders get more of the proceeds. The board approved a repurchase of up to 45 million shares, or 1.6% of shares in issue excluding treasury stock, for as much as 50 billion yen between Nov. 13 and March 31, 2027. All repurchased shares are due to be cancelled on April 19, 2027. The year-end dividend forecast rose by 3.50 yen to 27.25 yen a share, taking the annual payout to 51 yen. The company carried out a 4-for-1 stock split on Aug. 1.

Second half implied to be slower

The forecasts leave room. The five groups have already booked about 56% of the 7.06 trillion yen they expect for the year, which implies a second-half profit of about 3.1 trillion yen, down from 3.95 trillion yen in the first half. MUFG said it was 60% of the way to its initial 2.7 trillion yen target at the halfway mark, and Sumitomo Mitsui Trust's first-half profit equals about 60% of its new forecast.

MUFG's statement points to a reason for caution. The group raised its net income target but kept its full-year net operating profit target unchanged at 2.9 trillion yen, saying it was allowing for spending on future growth. Net operating profit in the first half was 56% of that target.

The larger variable is the Bank of Japan's rate path. Jiji attributed the upgrades to higher lending rates that followed the central bank's increases, so the pace of further moves will shape how much of the first-half gain carries into next year.

Sumitomo Mitsui Trust is scheduled to file its semi-annual securities report on Nov. 26. Sumitomo Mitsui Financial Group and Mizuho are due to file theirs on Nov. 27.