Basel III to improve Japanese major financial groups’ profits

However, risk-weighted assets for the four FIs are expected to rise.

Japan’s four major financial groups are expected to enjoy improving profitability and capital ratios from the implementation of the final Basel III standards, says Fitch Ratings.

“We expect higher interest rates in Japan to support profitability through wider net interest margins, whilst overseas margins may be pressured by falling rates,” the ratings agency said in a commentary, naming Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Trust Holdings.

However, Fitch also warned of a rise in risk-weighted assets (RWAs) from the implementation of final Basel III standards, and business growth will continue to challenge profitability and capital ratios. 

Overall, Fitch expects the banks to be able to successfully execute their medium-term management plans. This includes both financial and non-financial plans and targets.

“[These] would strengthen the quality and long-term sustainability of earnings and support stable capitalisation,” Fitch ratings said.