Mizuho Financial Group, Inc. (MFG)

F2Q2011 Earnings Conference Call

November 14, 2011 8:00 AM ET


Koji Fujiwara – Chief Investor Relations Officer


Graeme Knowd – Morgan Stanley

Carl Hammond [ph]



This is Premiere Global Services. Please stand by, we are about to begin. Good day everyone and welcome to Mizuho Financial Group’s Internet Conference Financial Results for the second quarter, first half of fiscal year 2011. For the duration of the presentation, all lines will be in a listen-only mode. Just a reminder, today’s conference is being recorded for replay purposes. If you have any objection, you may disconnect at this time.

Now, I would like to hand the conference over to Mr. Koji Fujiwara, Chief Investor Relations Officer of Mizuho Financial Group. Over to you, Mr. Fujiwara.

Koji Fujiwara

Thank you very much. Ladies and gentlemen, thank you for joining Mizuho Financial Group Internet Conference for fiscal 2011 interim results. My name is Koji Fujiwara, Chief IR Officer of Mizuho Financial Group. I will make a presentation for about 10 minutes, which will be followed by a Q&A session.

The major items covered will be our interim results for fiscal 2011, capital management, earnings plan for fiscal 2011, and our proposed merger of Mizuho Bank and Mizuho Corporate Bank, our two banking subsidiaries.

First, please turn to page 4, which shows our interim results. This slide covers the highlights of our interim results for fiscal 2011. Please take a look at on the table on the right. The 3 Banks’ gross profit amounted to 792 billion yen, a year-on-year decrease of 88 billion yen. This was mainly due to a decrease in income from trading segment. The gross profit from the customer group also decreased by 5 billion yen, despite an increase in income from robust business, particularly from Asia.

G&A expense decreased by 3 billion yen to 432 billion yen, mainly with our continued overall cost reduction efforts. As a result, the 3 Banks’ net business profit amounted to 359 billion yen, a decrease by 85 billion yen on year-on-year basis. Meanwhile, net credit cost amounted to a net reversal of 8 billion yen. Our net loss related to stock amounted to 67 billion yen. This was mainly due to a recordings impairment loss from the certain stock reflecting a decline in stock prices. As a result, the 3 Banks’ net income decreased by 202 billion yen to 152 billion yen.

Now, please take a look at on the table on the left which shows our consolidated results. With the 77.4 billion yen impact of turning the three listed subsidiaries into wholly-owned subsidiaries, our consolidated net income amounted to 254 billion yen as indicated at the bottom left. This is an achievement of about 110% against 230 billion yen, our planned net income for the first half and about 55% against 460 billion yen our planned net income for full fiscal 2011.

Please turn to page 5. This slide describes the trend of our loan balance and domestic loan and deposit rate margins. As shown in the bar chart, the 3 Banks’ average loan balance for the first half of fiscal 2011 was 60.8 trillion yen, a decrease over 0.3 trillion yen from the second half of fiscal 2010. This was due to a decrease in the domestic loan, particularly those two the Japanese government, despite an increase in overseas loans. The line chart at the top of the area shows the aggregate loan and deposit rate margin for domestic operations. The margin for the first half of fiscal 2011 was 1.32%, a decrease by 0.04% from that over the second half of fiscal 2010.

Please turn to our next page. This slide describes the status of our non-interest income. Non-interest income of the 3 Banks increased by 2 billion yen on a year-over-year basis. The main positive contribution came from non-interest income from overseas business, particularly in Asia.

Please turn to Page 7. This slide covers Mizuho asset quality. Firstly, as for the 3 Banks credit costs, we recorded a net reversal of 8 billion yen. This was primarily due to an improved obligor classification. Secondly, please take a look at the chart on the right. The balance of the non-performing loan was 1.1 trillion yen and our net NPL ratio also remained at the low level of 0.82%. Thus, we maintained a sufficient financial soundness as of the end of September.

Please turn to our next page. Our consolidated Tier 1 capital ratio was 11.89% and consolidated Capital Adequacy Ratio was 14.92% as of the end of September 2011. In relation to the capital regulation, our medium-term target is to increase our Common Equity Capital Ratio to the mid 8% level under Basel III as of the end of fiscal 2012. We believe that we will be able to sufficiently meet the new capital regulation by accumulating the retained earnings and improving asset efficiency. In terms of our dividend policy, our plan to make cash dividend payment of 6 yen per share of the common stock for fiscal 2011 has not changed.

Please turn to Page 9. This slide describes our earnings plan for fiscal 2011. Please take a look at the consolidated items shown in the table on the left. We now plan consolidated net business profit for the full fiscal year to be 770 billion yen, year-on-year increase of 28 billion yen. Please take a look at on the table on the right, which shows that the earnings plan for our 3 Banks, net business profit are planned to decrease on a year-on-year basis. Credit-related costs are estimated to be a cost of 63 billion yen considering the uncertainty over the global economy. We estimate that net gains related to stock to be 65 billion yen, mainly through our continuous effort to reduce our stock portfolio. Based on the above, we plan consolidated net income to be 460 billion yen remaining unchanged.

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