Morningstar | Japan Post Bank Enjoys Some Stability in Latest Quarter, but Hedging Costs Set to Rise
Japan Post Bank reported a similar quarter for July-September (the second quarter of the fiscal year ending March 2019) as it did three months ago for the April-June first fiscal quarter, with net revenue down 5% year on year and operating profit down 18% amid flat expenses. However, we think it will face challenging conditions in the second half of the year. Both the U.S. dollar London interbank offered rate and the cross-currency basis, which is the basis spread added to Libor when using foreign-exchange swaps to fund dollars with yen, rose significantly at the end of September following a six-month period of relative stability. This will increase Japan Post Bank’s hedging costs for its large portfolio of foreign bonds in the October-December quarter and reduce net interest income further.We continue to be more bearish on Japan Post Bank at its current valuation than on other Japanese banks, and we maintain our JPY 952 fair value estimate, which is 28% below the current share price. Since its privatization in 2007, Japan Post Bank has never achieved an annual return on equity higher than 4%, and we think the outlook for the next few years is even tougher due to climbing foreign-currency hedging costs on the back of the rise in short-term U.S. dollar interest rates.
Japan Post Bank is a commercial banking group based in Japan. Co. is engaged in banking operations as a member of the Japan Post Group with total assets of Y209,568,820 million as of Mar 31 2017. Co.'s principal operations comprise deposit-taking, syndicated loans and other lending, securities investment, domestic and foreign exchange, retail sales of Japanese government bonds and investment trusts as well as insurance products, intermediary services including mortgages, and credit card operations. Co. provides its products and services through a nationwide network of approximately 23,826 post office. In addition Co. maintains a network of 234 banking branches.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.