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Financial Results of Japan's Banks for Fiscal 2013

October 31, 2014
Financial System and Bank Examination Department
Bank of Japan

Summary

Net income for fiscal 2013 increased by around 5 percent at major banks and around 30 percent at regional banks relative to fiscal 2012. Net income at regional banks slightly exceeded the all-time high recorded in fiscal 2005.

Factors behind this increase in net income included a substantial decline in credit costs reflecting an improvement in the quality of assets as well as a rise in stock prices that boosted profits in a number of areas, as the economy continued to recover moderately.

Credit costs contributed to a rise in income: reversals in credit costs increased at major banks mainly due to a decrease in the amount of additional nonperforming loans (NPLs) and in the loan-loss provision ratio, and credit costs declined significantly at regional banks. The rise in stock prices boosted profits through (1) an improvement in realized gains/losses on stockholdings reflecting a decrease in losses on devaluation of stocks (losses from impairment of stocks) and an increase in gains on sales of stocks, (2) an increase in profits from investment trusts due to cancellations (including net interest income), and (3) an increase in fees and commissions for sales of investments trusts (including net non-interest income).

Interest rate spreads on loans in the domestic business sector continued to narrow. Consequently, core profitability in the domestic business sector remained on a downtrend, despite an increase in the amount outstanding of loans. This tendency was especially strong in the case of regional banks and unlike major banks, where lending in the international business sector contributed to an increase in profits.

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