Japan megabanks profits rise on strong markets

Japan's top three banks have booked big net profit gains in the April to June quarter as stock market rises helped boost their bottom line while the trio ramp up overseas expansion. Mitsubishi UFJ Financial Group, the country's biggest lender, said Wednesday that its net profit surged 39.6 percent from a year earlier to 255.3 billion yen ($2.6 billion) in the quarter. Mitsubishi's results, mirrored by smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group, come as their stock trading businesses benefited from a surge in the Japanese stock market. Tokyo's bid to kickstart Japan's lumbering economy with big government spending and massive monetary easing pushed down the yen, helping the country's hard-hit exporters. That, in turn, saw investors pile into Japan's equity markets, pushing the Nikkei 225 stock index to a five-year high in May although it has slipped from its perch since then. The surge helped the brokerage businesses of Japanese banks which also hold large stock holdings on their own books with the rally driving up the value of those investments. The jump helped offset a decline in their bond trading business, a key profit driver in recent years. Japanese lenders are now cutting back on their reliance on domestic government bonds as the Bank of Japan's huge bond-buying measures announced in April start to reshape the country's debt markets. The BOJ's programme unsettled the domestic debt market, prompting Japanese banks to further trim their bond exposure. Despite the measures to stoke Japan's economy, domestic borrowing has remained weak with few signs that firms are ready to invest heavily while the country suffers from deflation which has crimped private spending and business investment. Falling prices have held back growth for years as consumers put off purchases in the hopes of getting them cheaper down the road, hurting producers. On Wednesday, Mizuho, Japan's third-biggest bank, said its quarterly net profit jumped 34.8 percent to 248.0 billion yen, while it left unchanged a full-year net profit forecast of 500 billion yen. The results come after Sumitomo Mitsui said Monday that its net profit more than doubled to 288.3 billion yen partly owing to a strong showing at its brokerage unit. The rosy results come as the firms tap overseas markets to drive growth and offset a shrinking domestic market. Earlier this month, Mitsubishi said it planned to buy 75 percent of Thailand's Bank of Ayudhya for about $5.6 billion, in what would be one of the biggest overseas acquisitions by a Japanese lender. In 2008, Mitsubishi invested 900 billion yen ($9.2 billion at current exchange rates) to buy a stake in Morgan Stanley, throwing the troubled Wall Street giant a lifeline during the financial crisis. In May, Sumitomo Mitsui struck an agreement for a 40 percent stake in Indonesia's PT Bank Tabungan Pensiunan Nasional for about $1.5 billion. -- Dow Jones Newswires contributed to this report --