The three megabanks enter a limitless upward trend! Supported by the 'Koichi trade' and strong earnings, progress towards record full-year profits reaches 90% [Earnings Summary]

Regarding the full-year net profit forecast,Mitsubishi UFJ and Sumitomo Mitsui have achieved three consecutive periods.、Mizuho achieves record profits for two consecutive terms.It is anticipated. At the stage of the third quarter financial results, the progress rates of the three companies are between 86.4% and 93.0%. In the final performance, further additions to the full-year targets seem likely.
Each company has set its medium to long-term ROE (Return on Equity) targets at 11-12%, when annualized.In the third quarter, Mitsubishi UFJ's ROE was in the 11% range, while Sumitomo Mitsui and Mizuho were in the 12% range..

At the interim earnings announcement, Mitsubishi UFJ raised its year-end dividend forecast and Sumitomo Mitsui increased both its interim and year-end dividend forecasts. However, this time all three companies kept their dividend forecasts unchanged.
However, this time,Mizuho added a 100 billion yen share buyback program, raising the cap of its previously announced 200 billion yen buyback program to 30 billion yen at the interim earnings release, while extending the acquisition period by one month until the end of March. Mizuho has set a policy of returning over 50% of profits to shareholders, but with the increase in the share repurchase program,the total payout ratio is expected to rise from the previous 58% to 67%. If the dividend forecast holds as expected, the dividend payout ratio is projected to be around 31%, lower than Mitsubishi UFJ or Sumitomo Mitsui's roughly 40%. Mizuho hasn’t changed its initial dividend forecast, likely prioritizing share buybacks over dividend increases amid considerations such as improving ROE.prioritized share buybacks over dividend increases.

Two tailwinds: interest rate hikes and rising long-term yields
One factor boosting the performance of megabanks is,Interest rate increaseRegarding interest rates, in December 2025,Expectations for additional interest rate hikes by the Bank of Japan and future rate increases,and,"Takichi Trade",byInterest rate increaseare two tailwinds blowing in their favor.

At the Bank of Japan’s monetary policy meeting on December 19, 2025, they decided to raise the policy interest rate by 0.25%, bringing it to around 0.75%,the highest level in about 30 years,a decision was made to implement this change.Banks' variable interest rates generally move in line with the policy interest rate.Furthermore, in the 'main opinions' from the January 26 meeting, there were mentions of the risk of the Bank of Japan falling behind the curve regarding interest rate hikes in response to rising prices. Additionally, opinions suggested that 'it is necessary to move forward to the next interest rate hike step without spending too much time verifying the impact of the rate hike.'which could lead to a faster pace of interest rate hikes.This has also been implied.
Moreover,The interest rate on 10-year government bonds (long-term interest rates)is on an upward trend due to concerns over fiscal expansion under the Takemichi administration, which advocates for 'responsible active fiscal policy.'On January 20, the long-term interest rate reached 2.33%, its highest level in 27 years.Generally,the interest rate on long-term loans is linked to long-term interest rates.I attached it. Generally,The interest rate for long-term loans is linked to long-term interest rates.To do.
Increases in policy rates and long-term interest rates generally lead to an expansion of net interest margins for banks,which in turn contributes toboosting their earnings.

The three megabanksestimate that the effect of the interest rate hike will contribute to an increase in profits on the scale of 100 billion yen annually.

The impact of unrealized losses on domestic bonds, such as government bonds, is minimal.
On the other hand, rising interest ratesThe risk of expanding unrealized losses on bonds such as government bonds being managedalso exists. Regional financial institutions, which have relied heavily on government bonds for deposit management, are facing substantial unrealized losses due to rising interest rates (falling bond prices). Particularly, the longer the average duration (effective investment term) of their held bonds, the more the unrealized losses expand with rising interest rates.
In cases where the market value of managed securities falls below 50% of the acquisition cost, accounting impairment treatment is required.

The 'other securities' excluding those held to maturity by the three megabanksgenerated unrealized gains ranging from approximately 70 billion yen to nearly 90 billion yen during April-December 2025,.while domestic bonds incurred unrealized losses of around 80 to 100 billion yen,but in domestic bonds, there is a compensating risk relationship withsignificant unrealized gains in stocks and foreign bonds,resulting in an overall positive position.

By the way, as of the third quarter of this fiscal year,Sumitomo Mitsui was the most 'operationally savvy' company by a narrow margin,with unrealized gains accounting for 1.5% of holdings in Mitsubishi UFJ, and 2.0% in both Sumitomo Mitsui and Mizuho.

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