Morningstar | Mizuho Still Supported by Credit Cost Reversals and Equity Sales, but Quality of Earnings Improves
Mizuho Financial Group reported better-than-expected results for the July-September quarter, achieving 63% of its full-year profit guidance with half the year still to go. Although net reversals of credit costs and gains on sales of equity securities once again bolstered Mizuho’s bottom line, we think the quality of earnings was better this time than in many recent quarters, with a sequential reduction in Mizuho’s high expense ratio from 74.6% to 67.6% and solid growth in fee income offsetting a still-negative trend in net interest income.We maintain our no-moat rating and fair value estimate of JPY 202.40, which is 4% above the current share price. Mizuho’s valuation is undemanding at 0.54 times book value and 9.3 times consensus earnings for next fiscal year, but we think Mizuho will have a harder time growing earnings than other major Japanese banks and its smaller capital cushion leaves it with less flexibility to increase dividends.
Mizuho Financial Group is a financial holding company with total assets of Y204,255,642 million as of Mar 31 2018. Retail & Business Banking Company provides financial services for individual customers and SMEs. Corporate & Institutional Company provides financial services for large corporations, financial institutions and public corporations. The Global Corporate Company provides financial services for Japanese overseas affiliated corporate customers and non-Japanese corporate customers. Global Markets Company invests in financial products with market risk. The Asset Management Company develops financial products and provides financial services for individuals and institutional investors.
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.
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