,Japan

Japan’s new PM a positive for banks’ earnings outlook: Jefferies

Banks’ credit costs are expected to undershoot their guidance.

Whoever emerges victorious, Japan’s upcoming new prime minister will boost the country’s top three banks—MUFG, Mizuho Bank, and SMFG—and by extension the performance of their bank stocks, reports Jefferies.

“We think that whoever wins, the imminent job of the new PM will be to support Japan’s economy as it normalizes and catches up with the other markets, to include more fiscal spending. We think that leads to a steeper yield curve bias (even though still range-bound) and the bank stocks at the lower end of the trading range,” Jefferies Equity Analyst Hideyasu Ban and Equity Associate Hiro Nakakura said in a report.

Jefferies has raised its earnings estimates for banks as it foresees lenders to lodge credit costs that are lower than expected.

“We raised our earnings estimates mainly due to our expectation that banks' credit costs will undershoot their guidance,” Ban and Nakakura wrote, noting that during the release of Q1 results (April to June), the banks' credit costs came in lower than their expectations. Banks had kept their cautious stance then given uncertainties around the COVID-19 situation. 

Whilst Jefferies believes that credit costs will go up after Q2 (around July to September) as lenders reclassify loans, it notes that the annual credit cost outlook would likely be lowered—and the earnings guidance will be raised—after Q2, thanks to better than expected overall credit quality supported by the government programs.

Expect more capital return activities beginning the third quarter of the fiscal year and onwards, or around after September. Investors can also expect to see more buyback announcements and DPS increases in the second half of the fiscal year, from late 2021 to early 2022.

Join Asian Banking & Finance community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

Anju Abrol has over 30 years of banking experience.
Tse Yi-Mun will lead the bank’s north Asia branch as its managing director and group head.
Clients can now purchase SC Hong Kong’s wealth management products.
Citi plans to offer around 100 types of wealth products from the mainland.
Agents can apply for the loan through the BRILink Mobile application.
The delinquency ratio has been on the decline since May 2018.
The market is forecasted to rebound by over 15% in 2021.
The fund aims to achieve a potential monthly dividend payout of 5% per annum.
Its Vice President of Solution Consulting in Singapore discussed how to bridge the digital gap and humanise the banking experience in the new normal.
There is an increased demand for loans for home purchases and 'jeonse.’
The partnership is eyeing 16 million customers by 2025.
The U-Energy platform has nine partners that can support energy efficiency projects.
The bank expects its own climate financing in 2019-2021 to reach $17b.