Mizuho Financial Group (MFG) Q2 2026 earnings review
Mizuho raises its profit plan, but bond losses widen
Higher Japanese interest rates lifted Mizuho Financial Group's lending profits while lowering the market value of its bond holdings. First-half net income rose 30% to ¥896.5 billion as loan and bond yields in Japan climbed much faster than deposit payouts, and second-quarter profit rose 19% by our math. The banking group also sold more corporate stock holdings and raised its full-year profit outlook to ¥1.6 trillion.
| First-half net income | ¥896.5B +29.9% from a year ago |
|---|---|
| Mizuho Bank domestic net interest margin | 0.49% 0.05% a year ago |
| Full-year net income outlook | Raised ¥200B to ¥1.60T (+28.1% from last year) |
| Annual dividend outlook | ¥200/share raised from ¥150/share |
⚖️ Verdict: 🟢 Bullish
The story got better because domestic lending spreads expanded enough to drive a ¥200 billion increase in the full-year profit plan and a ¥50 increase in the annual dividend to ¥200 per share. One caution: higher interest rates also deepened paper losses on Japanese and foreign bonds, which cut comprehensive income by 70% and trimmed the group's core capital ratio.
The question now is whether domestic lending spreads keep widening or bond losses and rising deposit costs eat into the gains. If corporate loan demand stays firm and savers leave cash in low-rate accounts, core profit will keep climbing; if bond yields jump further, paper losses on securities will weigh on capital. Full-year bond valuations and deposit rates in March will tell.
🐂 Bull Case
Higher Japanese Interest Rates Lift Lending Profit
Mizuho Financial Group, one of Japan's three largest banking groups, is earning much more on its domestic loans and securities after the Bank of Japan raised interest rates. At its main banking unit, Mizuho Bank, the domestic net interest margin—the spread between what the bank earns on loans and bonds and what it pays on deposits and funding—rose to 0.49% in the first half from 0.05% a year ago.
- Domestic return on loans at Mizuho Bank: 1.68%, up 0.43 percentage points from a year ago
- Domestic return on securities at Mizuho Bank: 3.07%, up 1.91 percentage points
- Domestic cost of deposits at Mizuho Bank: 0.37%, up 0.18 percentage points
- Consolidated net interest income: ¥771.3 billion in the first half, up 18.2% from a year ago
This matters because loan and bond yields are rising more than twice as fast as deposit rates. Customers are leaving cash in low-rate accounts while borrowers pay higher rates, so the domestic net interest income of the group's two main banks nearly doubled from a year ago to ¥753.9 billion.
What to watch: Mizuho Bank's domestic deposit cost in the full-year report. A faster rise in deposit rates would show that savers are demanding higher payouts, which would narrow the lending spread.
Stock Sales and Buybacks Lift Shareholder Payouts
The Tokyo-based lender continues to sell down its cross-shareholdings—stock it holds in Japanese corporate clients to cement business ties—and return the proceeds to shareholders. In the first half, net gains from selling stocks rose 57.2% from a year ago to ¥205.0 billion, with ¥174.5 billion of that booked in the second quarter alone by our math.
Even without those stock gains, first-half ordinary profit rose 45.6% by our math, so core banking and stock sales are working together. The group bought back ¥204.8 billion of its own shares in the first six months, nearly double the ¥103.8 billion it spent a year earlier, and cancelled ¥300.0 billion of treasury stock. That reduced the average share count by 2.7% from a year ago.
What to watch: Whether management announces a new share buyback program for the second half at the investor conference on November 20. Another buyback would keep shrinking the share count and lifting profit per share faster than net income.
Revenue Growth Outpaces Overhead Costs
Higher interest and fee revenue is flowing straight into profit because overhead costs are growing much slower than revenue. Across the group, general and administrative expenses—staff pay, technology and office overhead—rose 7.2% from a year ago to ¥1,036.0 billion in the first half, while consolidated gross profit rose 26.9% to ¥2,067.8 billion.
By our math, overhead costs fell by 9.2 percentage points as a share of gross profit, down to 50.1%. At the two main banking units combined, the expense ratio dropped 17.1 percentage points from a year ago to 34.6%, even as personnel costs rose 12.1% and technology and non-personnel costs rose 12.5%. Fee and commission net income also grew 19.3% in the first half to ¥557.8 billion.
What to watch: The consolidated expense ratio in the second half. If inflation in Japan pushes wage and system costs higher while rate hikes pause, the cost ratio will stop improving.
🐻 Bear Case
Rising Interest Rates Deepen Paper Losses on Bonds
"Following the result from 1H, MHFG revised Consolidated Earnings Estimates for Fiscal 2026," the company said as it raised its full-year profit target to ¥1.6 trillion. Yet while higher interest rates boost lending income, they also lower the market value of the bonds Mizuho already owns.
- Comprehensive income (net profit plus paper gains and losses): ¥257.3 billion, down 69.5% from a year ago
- Net unrealized losses on foreign bonds: ¥589.8 billion, widened from ¥321.1 billion in March
- Net unrealized losses on Japanese bonds: ¥192.5 billion, widened from ¥138.6 billion in March
- Net unrealized losses on bonds held to maturity: ¥368.8 billion, widened from ¥138.4 billion in March
Combined with ¥339.4 billion of deferred losses on hedging derivatives during the six months, these bond markdowns caused total net assets to shrink slightly to ¥11.27 trillion despite strong net income. The group's Common Equity Tier 1 ratio, a core measure of bank capital strength against risk-weighted assets, slipped 0.42 percentage points from March to 12.74%.
What to watch: Net unrealized losses on Japanese and foreign bonds at year-end. Further bond price drops would continue to drain comprehensive income and limit how much capital the bank can return.
Overseas Trading Losses Weigh on International Banking
While domestic banking thrived, Mizuho Bank's international trading desks lost money in the first half. International net trading income at Mizuho Bank swung to a loss of ¥49.7 billion, compared with a profit of ¥66.2 billion in the first half of last year—a negative swing of ¥115.9 billion.
At the same time, the average interest rate Mizuho Bank earned on international loans fell 0.36 percentage points from a year ago to 4.52%, outpacing the 0.32-point drop in international deposit costs to 3.11%. Growth in international net interest income (+38.1% to ¥341.0 billion) and other operating income (+¥140.5 billion) offset the trading loss, but overseas market volatility remains a drag on earnings.
What to watch: International net trading income at Mizuho Bank in the second half. A second straight period of losses would show that positioning in foreign interest rates and currencies is still hurting the overseas division.
Credit Costs Return as Past Loan Recoveries Fade
A year ago, Mizuho boosted its profit by releasing ¥32.4 billion of loan-loss reserves back into income as troubled borrowers recovered. In the first half of fiscal 2026, that tailwind disappeared and credit-related costs turned into a net expense of ¥7.5 billion.
Total expenses for portfolio problems rose to ¥44.1 billion from ¥17.0 billion a year earlier, including ¥35.9 billion of direct loan write-offs (up from ¥14.2 billion). Reversals of past loan-loss allowances fell to ¥36.5 billion from ¥49.3 billion, and the two banks categorized ¥67.1 billion of new claims as bankrupt or at collection risk during the six months.
What to watch: Second-half credit-related costs and new bankruptcies among domestic small and medium-sized enterprises. Higher borrowing rates in Japan could push weaker corporate borrowers into default.
💲 Other KPIs
Loans and bills discounted rose by ¥3.07 trillion, or 3.1%, over the six months from March 2026. At the two main banks, domestic loans grew by ¥2.57 trillion—led by finance, real estate, construction and wholesale borrowers—while overseas loans increased by ¥756.4 billion, mainly in Asia-Pacific and Europe.
Deposits climbed by ¥8.84 trillion, or 5.3%, from March 2026, outpacing loan growth and providing low-cost funding as negotiable certificates of deposit shrank by ¥3.16 trillion. Domestic corporate deposits at the two banks rose by ¥3.22 trillion to ¥71.52 trillion, while individual deposits were nearly unchanged at ¥49.25 trillion.
Troubled loans fell by ¥165.9 billion from March 2026, bringing the non-performing loan ratio—bad loans as a share of total credit claims—down to 0.63% from 0.80% six months ago and 0.97% in March 2025. The two banks removed ¥192.1 billion of bad loans from their balance sheets through loan sales and debt recovery.
🔮 Guidance
Raised. Management lifted the full-year net profit plan by ¥200 billion, or 14.3%, calling for 28.1% growth from last year. It is the second raise this year: +¥100 billion in the first quarter and +¥200 billion in the second. By our math, the plan leaves ¥703.5 billion for the second half, up 25.8% from a year ago.
Raised. The full-year profit per share outlook moved up by ¥85.34, or 14.8%, reflecting both the higher net profit target and a smaller share count after first-half buybacks. By our math, with ¥368.81 earned in the first half, the outlook leaves ¥291.61 per share for the second half.
Raised. The bank increased its annual dividend plan by ¥50.00 per share, or 33.3%, to ¥200.00—up 37.9% from the ¥145.00 paid in fiscal 2025. The payout splits evenly between a ¥100.00 interim dividend and a ¥100.00 year-end estimate, matching the group's policy of paying out 50% or more of net profit.
❓ Key Questions
How did each in-house company perform in Q2?
The interim financial statements do not include the profit breakdown across Retail, Corporate, Global Corporate, Global Markets, and Asset Management. The November 20 investor presentation will show whether customer divisions or market trading drove the second-quarter beat.
What is the new full-year net business profit target?
Management raised its consolidated net business profit outlook to ¥1.75 trillion in the first quarter, but the second-quarter release only updated the bottom-line net profit target. Investors need to know how much of the ¥200 billion net profit raise comes from core operations versus equity sales.
How much cross-shareholding reduction was booked at cost?
Mizuho targets over ¥350 billion in Japanese stock reductions on an acquisition-cost basis between March 2025 and March 2028, and had reached ¥125.2 billion by June. Given the ¥205 billion in first-half stock gains, how close is the bank to finishing its three-year target early?
Will Mizuho authorize another share buyback for the second half?
The group spent ¥204.8 billion on buybacks in the first half, completing the ¥200 billion maximum it guided in the first quarter. With net profit raised by ¥200 billion and the Common Equity Tier 1 ratio at 12.74%, will management add a new repurchase program?