Japan Post Holdings said net income for the six months to Sept. 30 rose 62.9% to 232.2 billion yen, as its banking arm earned far more on money parked at the Bank of Japan and offset a weaker half at its life insurer and a deeper loss in mail and parcels.

The results, released on Friday, Nov. 13, show how quickly higher Japanese interest rates are flowing into the earnings of the country's largest deposit taker. For investors across Asia who hold Japanese financials, the split inside the group is the point: Japan Post Bank raised its full-year targets, Japan Post Insurance cut one forecast and raised another, and the parent left its consolidated outlook untouched.

Group ordinary income, the Japanese measure closest to revenue, rose 3.9% to 5.9035 trillion yen, according to the company's financial highlights. Net ordinary income climbed 25% to 652.1 billion yen. The first-half profit already equals 61.1% of the 380 billion yen full-year net income target the group set in May.

Japan Post Bank lifts forecast on Bank of Japan deposits

Japan Post Bank posted consolidated net income of 381.5 billion yen, up 58.7% from 240.4 billion yen a year earlier. Its ordinary income rose 22.7% to 1.7166 trillion yen.

The engine was interest. Non-consolidated net interest income rose to 863.5 billion yen from 563.5 billion yen, as interest income grew by 397.8 billion yen while interest expenses rose by 97.8 billion yen, the filing showed.

The bank raised its full-year net income forecast to 700 billion yen from 660 billion yen and lifted its net ordinary income target to 1.01 trillion yen from 955 billion yen. Japan Post Holdings said the main reason was higher than expected interest income on Bank of Japan deposits, because the central bank's policy rate increase came earlier than the bank had assumed.

Not every line improved. Non-recurring gains fell to 119.5 billion yen from 211 billion yen, according to the bank's highlights page in the group filing.

Japan Post Insurance cuts one target, raises another

Japan Post Insurance, which is 49.8% owned by the parent, had a weaker half. Ordinary income fell 7.6% to 2.6616 trillion yen, net ordinary income dropped 39% to 112.2 billion yen and net income slipped about 7% to 87 billion yen.

The insurer's own preferred yardstick looked better. Adjusted profit, which the company uses as the basis for shareholder returns, was 91.1 billion yen, or 58.8% of its previous full-year forecast of about 155 billion yen. It raised that forecast to about 180 billion yen, citing solid investment performance, and said the new figure would exceed the previous fiscal year's result.

The full-year forecasts moved in opposite directions. The insurer cut its ordinary profit target to 200 billion yen from 250 billion yen, because it expects higher investment expenses, mainly losses on sales of securities. It raised its net income forecast to 172 billion yen from 141 billion yen, because those losses will be offset by a release of its reserve for price fluctuations and by higher investment income, Japan Post Holdings said.

Sales picked up. New individual insurance policies rose 29.9% to 323,000, helped by a premium revision in May, the insurer said. Policies in force still fell 2% from March to 17.37 million.

Logistics losses widen, Aflac stake helps

The mail and parcel business moved the other way. Japan Post Co. reported a net loss of 29.9 billion yen for the half, wider by 20.7 billion yen, as the postal and domestic logistics segment's operating loss deepened to 58.3 billion yen from 25.5 billion yen.

The international logistics business, which includes Australia's Toll Holdings, raised its operating revenue to 324.1 billion yen from 231.9 billion yen, and its EBIT rose to 8.9 billion yen from 4.2 billion yen. The real estate business lifted net operating income to 20.8 billion yen from 11.3 billion yen.

The group's equity stake in U.S. insurer Aflac also contributed more. Equity method income from Aflac rose to 22.2 billion yen from 3.1 billion yen a year earlier, according to the filing.

Japan Post Holdings kept its consolidated forecasts for net ordinary income of 1.17 trillion yen and net income of 380 billion yen. It said the revisions at the bank and the insurer had a limited effect on the group, and that trends in the postal and logistics business, which earns a large share of its profit in the second half, remain fluid. The company forecasts a 104 billion yen operating loss for postal and domestic logistics for the full year.

The interim dividend is 30 yen per share, with an unchanged full-year forecast of 60 yen. Under the Japan Post Holdings Act, its dividend payments need approval from the Minister for Internal Affairs and Communications.

The next test for the bank's earnings is the path of Japanese rates: each further move by the Bank of Japan feeds directly into the interest Japan Post Bank earns on its deposits at the central bank. The group reports nine-month results in February.