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September 29, 2017
Financial System and Bank Examination Department
Bank of Japan
The characteristics of the financial results of Japan's banks for fiscal 2016 are summarized in three points below.
First, net income declined for all types of banks; major banks, regional banks, and shinkin banks. Main factors are the decline in net interest income through the shrinking domestic lending margins and realized losses on U.S. Treasury bondholdings due to the rise in U.S. long-term interest rates mainly among major and regional banks. On the other hand, low and stable credit cost ratios and the widening of the extent to which realized gains exceeded losses on stockholdings, including sales of strategic stockholdings at major and regional banks, have supported the level of net income.
Second, operating profits from core business, which show core profitability, decreased for all types of banks and the declining trend accelerated somewhat in regional and shinkin banks. This is attributable to a) a decline in net interest income through shrinking domestic lending margins and b) a decline in fees and commissions associated with sales of financial instruments such as investment trusts and insurance products.
Third, financial institutions have maintained their financial soundness as a whole. With regard to the generation of credit cost, credit cost ratios remained low at major banks as the occurrence of loan-loss provisions to certain domestic large firms was outweighed by the decline in the occurrence of loan-loss provisions to overseas exposure to the commodity sector. Credit cost ratios continued to be restrained at regional and shinkin banks. Meanwhile, the amount of capital continued to increase mainly at major banks, due to the accumulation of retained earnings.
This Report basically uses data available as at March 31, 2017.
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