Total profit margin for the fiscal year ending March 31, 2022 was 0.16% at the same level as the previous year

Survey on “total profit margin” of 106 domestic banks
　The “total profit margin (median)” of the financial results for the fiscal year ending 2022/3 of 106 domestic banks was 0.16%, the same level as the previous year.
　However, the “fund management yield (median)” was 0.86% (0.94% the previous year), and the decline was unstoppable, down 0.08 points from the previous year, and strict fund management continues.
　The “fund management yield (median)” for the fiscal year ending 2022/3 was 0.86%, falling below 1.00% for 2 consecutive years for the fiscal year ending March 31. In 105 banks, excluding 1 bank that cannot be compared with the same period last year due to mergers, only 12 lines (composition ratio 11.4%) exceeded the previous year's fund management yield. Meanwhile, “fund raising costs (median)” shrank to 0.68% (0.77% the previous year), and 104 banks excluding the Shiga Bank fell below the previous year.
　“Total profit margin” indicates the difference between fund management yield and procurement yield. The number of “reversals,” where “fund management yield” falls below fund raising costs, is 6 lines, a decrease of 2 lines from bank 8 the previous year. “Backwards” were 2 banks each: a major bank (2 banks in the previous year), a regional bank (same 4 banks), and a second regional bank (same 2 banks). It was the second year in a row that “backwards” fell below 10 lines in the March fiscal year, and it was the lowest in the 10 years since 2013.
　Interest rates on institutional loans (“virtually no interest/unsecured loans”, etc.) to support the financing of the COVID-19 pandemic are higher than loans before the COVID-19 pandemic, when loan competition was intense. However, interest rates on regular loans to major companies and excellent local companies continue to be low even now. While improvements in interest rate income are not expected, securing income other than lending, such as management restructuring, closure support, business succession, M&A, etc. of small and medium-sized enterprises for the post-COVID-19 pandemic has become an issue.
* This survey investigated and analyzed “total profit margin” (domestic business division) in the financial results for the fiscal year ending 2022/3 of 106 domestic banks.
* “Total profit margin” is an index showing profit calculated by “fund management yield” - “fund raising cost ratio.” When the “fund management yield,” which indicates interest on loans or securities, etc., falls below the “fund raising cost ratio” of labor costs and costs required to raise funds, it becomes a “reversal” where no profit has been made from lending or management.
*The banking business category is 1. 7 major banks including Saitama Resona, 2. Regional banks are members of the National Regional Bank Association, and 3. The second regional bank is a member bank of the Second Regional Bank Association.

The “total profit margin (median)” of 106 domestic banks for the fiscal year ending 2022/3 was 0.16%, the same level as the previous year.
　However, the “fund management yield (median)” was 0.86%, down 0.08 points from 0.94% the previous year. Loan interest rates for COVID-related support are set higher than normal loans, but since normal interest rates continue to be low for major companies and excellent local companies, they have fallen below 1.00% for 2 consecutive years.
　Of the 106 banks, which can be compared with the previous year, the “fund management yield” surpassed the previous year in 12 banks (composition ratio 11.4%), which was only 10%. Meanwhile, it was 104 banks excluding the Shiga Bank that had lower “financing costs” than the previous year.
　While it is difficult to raise loan interest rates, banks are striving to reduce “financing costs” by reviewing fund raising costs and reducing expenses in order to secure “total profit margins.”

The increase in “total profit margin” was 60% at 67 banks, supported by a reduction in “financing costs”
　Of the 106 domestic banks, of 105 banks that can be compared to the previous year, the “total profit margin” for the fiscal year ending 2022/3 rose from the previous year to 67 banks (composition ratio 63.8%), which was the same number as the previous year.
　Of the 67 banks that rose, the “fund management yield” of 46 banks (same 68.6%) shrank from the previous year. However, “funding costs” also fell from the previous year, leading to an increase in “total profit margins.”
　The highest “total profit margin” was 0.81 percent (0.98 percent the previous year) for Suruga Bank. Next, Shinsei Bank was 0.78% (same 0.68%), Miyazaki Bank was 0.60% (same 0.44%), Saga Kyoei Bank was 0.57% (same 0.47%), and Saikyo Bank (same 0.51%) and Kumamoto Bank (same 0.41%) were each 0.48%.
　The lowest was ▲0.45% (same ▲0.48%) of Aozora Bank.

There were only 6 banks (2 major banks, regional banks, and second regional banks) where “total profit margin” was negative. There was a decrease of 2 lines from 8 lines the previous year, and it was the lowest in the 10 years since 2013 for the March fiscal year.
　“Reversal” surged to 20 banks in the 2017/3 fiscal year after the introduction of negative interest rates, and recorded the highest number for the fiscal year ending March 31 after 2010, when the investigation began. Even after that, “fund management yield” did not improve due to low interest rates, and “total profit margin” remained at the same level as the previous year by compressing fund raising costs.
　In the 2022/3 fiscal year, the major banks were Mizuho Bank (▲0.13%), Aozora Bank (▲0.45%), regional banks were 33 Bank (▲0.15%), Shiga Bank (▲0.04%), and the second regional banks were Tokyo Star Bank (▲0.08%), and Minato Bank (▲0.00%), with a total of 6 banks.
　Of the 6 banks, only Tokyo Star Bank's “fund management yield” rose among the 5 banks (excluding 33 banks) that can be compared to the previous year, and only the Shiga Bank surpassed the previous year in terms of “fund raising costs.”

Financial institutions have actively increased loans to small and medium-sized enterprises with COVID-related support. However, interest rates continue to be low on loans to major companies, excellent local enterprises, local governments, etc., and the decline in “fund management yields” has not stopped.
　Meanwhile, while benefits, support money, etc. go to deposits, fund raising costs from the interbank market where financial institutions trade with each other are also low, and “fund raising costs” continue to shrink. As a result, “total profit margin” rose to the bottom of 2020 (0.13%) for the March fiscal year, and 2022 was 0.16% at the same level as the previous year.
　Since the Bank of Japan introduced negative interest rates in 2016/2, loan interest rates at financial institutions have spurred low interest rates, and securing profits in the main business has become more difficult. Furthermore, corporate bankruptcy suppressed by COVID-related support continued to be at a historically low level, but it surpassed the same month last year for 6 consecutive months from 2022/4, and management polarization of small and medium-sized enterprises is becoming apparent. Under these circumstances, financial institutions are not individual enterprises, but are accumulating debt loss provisions in anticipation of the future situation for each region/industry, and credit expenses are increasing.
　There are many small and medium-sized enterprises that have fallen into excessive debt, and financial institutions have shown a cautious stance on lending to companies with a high risk of bad debts. In a situation where growth in loan earnings cannot be expected, business restructuring and expansion of the non-interest income field have become urgent issues for financial institutions.

Author: Tokyo Shoko Research

Last updated: 11/2 (Wed) 14:30