By Kazuma Nagahara and Miyu Okada
Yomiuri Shimbun Staff Writers
The combined net profit of all three Japanese megabanks -- Mitsubishi UFJ Financial Group Inc. $(MUFG)$, Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. -- rose 33.9% year on year to reach 5.25 trillion yen in the fiscal year ended March 2026, exceeding the 5-trillion-yen threshold for the first time in history, according to their financial results.
The strong performance of the megabanks was driven by expanding loan spreads caused by rising interest rates.
All three megabanks also project record net profits for this fiscal year, which ends March 2027. However, there is a certain level of uncertainty surrounding the megabanks, as the domestic economy may cool down if the Middle East conflict drags on.
"We are making substantial progress (toward achieving the medium-term business plan)," said Junichi Hanzawa, president and group CEO of MUFG, at a press conference held Friday.
MUFG became the first Japanese bank to surpass 2 trillion yen in net profit, reaching 2.42 trillion yen last fiscal year. The figure increased 30.3% from the previous fiscal year to set a record high.
Sumitomo Mitsui and Mizuho also made record high net profits. The figure for the former increased 34.4% to 1.58 trillion yen, while the latter saw an increase of 41% to 1.24 trillion yen. The combined net profit of the three megabanks has hit record highs for three consecutive years.
The strong financial results were driven by their main lending business. The Bank of Japan has been raising interest rates since ending its negative interest rate policy in March 2024. The central bank raised the policy rate to around 0.75% in December 2025.
Strong loan demand
When the policy rate increases, banks raise rates on corporate loans and personal mortgages. However, they do not immediately raise their rates on deposits. By increasing lending rates more than deposit rates, banks widen their loan spreads, allowing them to increase profits.
The difference between domestic lending rates and deposit rates at the three megabanks has risen to a range of 0.96%-1.14%, increasing from the 0.81%-0.96% range in the previous fiscal year. If the BOJ raises the policy rate by 0.25%, the combined net interest income of the three megabanks will be boosted by around 300 billion yen.
The three megabanks were also helped by the fact that borrowers' appetite for investment did not wane, as the impact of the high U.S. tariff policy on corporate activities was less than expected. "I wondered what would happen when the tariff policy of (U.S. President Donald) Trump came up, but to my surprise, various corporate activities -- such as capital investment -- took place," said Masahiro Kihara, president and group CEO of Mizuho. "Demand for capital has been robust."
Concern over funding sources
The three megabanks expect to set record net profits again this fiscal year as the BOJ is expected to continue raising policy rates. MUFG projects its net profit to reach 2.7 trillion yen, with Sumitomo Mitsui expects 1.7 trillion yen and Mizuho expects 1.3 trillion yen. This may draw criticism from some clients and shareholders who seek higher returns on investment, claiming that the banks are making too much money.
However, the megabanks are concerned about a further escalation of the Middle East conflict. Imports of crude oil and naphtha have stalled because of the conflict, which is beginning to affect companies such as auto part makers and chemical manufacturers. Soaring crude oil prices are expected to increase logistics and electricity costs, dealing a blow to a wide range of industries. In response, the three megabanks have set aside a total of about 145 billion yen in loan-loss reserves to prepare for potential defaults.
Another cause for concern is the securing of lending funds. Growing public interest in asset management and competition against online banks makes it increasingly difficult for megabanks to attract deposits. Toru Nakashima, president and group CEO of Sumitomo Mitsui, hinted at the possibility of slowing the pace of new loans, saying: "Deposit growth is beginning to stall nationwide. We have no choice but to be selective in our lending to a certain degree."
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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May 18, 2026 23:18 ET (03:18 GMT)
Copyright (c) 2026 The Yomiuri Shimbun
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