Tokyo, May 15 (Jiji Press)–Combined consolidated net profits at five major Japanese banking groups are seen plunging to an 11-year low in fiscal 2020 on ballooning costs to prepare for business failures amid the coronavirus pandemic.
For the year ending in March 2021, their combined profits are estimated at 1.53 trillion yen, down 23.4 pct from the previous year, according to the latest earnings data released by the five groups, including Mitsubishi UFJ Financial Group Inc. <8306>.
Their combined net profits for fiscal 2019 fell 2.4 pct to 1,996 billion yen.
In fiscal 2020, credit costs, including loan-loss allowances, are forecast to total 542 billion yen at all groups except Mitsubishi UFJ, more than double the previous year’s sum among the five groups.
The projected amount compares with 850 billion yen in credit costs logged in fiscal 2009 after U.S. investment bank Lehman Brothers collapsed in 2008, triggering a global financial crisis.
As a result, all except Mitsubishi UFJ brace for a double-digit net profit fall in the current year. Among them, Sumitomo Mitsui Financial Group Inc. <8316> expects a drop of 43.2 pct.
In the latest year, combined net core banking profits at the five groups rose 15.9 pct to 2,075.5 billion yen. But their bottom line was hurt by increasing credit costs.
Mitsubishi UFJ saw its net profit dive 39.5 pct to 528.1 billion yen, also because of substantial losses on shareholdings.
As a result, Sumitomo Mitsui Financial replaced Mitsubishi UFJ as the top earner in the Japanese banking industry in terms of annual net profit for the first time. Its bottom line fell 3.1 pct to 703.8 billion yen.
The five groups’ main scenario is that the COVID-19 crisis will peak out during April-September. But concerns linger that the outbreak may expand again.
“The impact of the coronavirus is far-reaching,” Sumitomo Mitsui Financial President Jun Ota told a teleconference.