Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

J. Brian Waterhouse has been covering the Japanese financial sector as an analyst continuously since 1976, working for CLSA, Japaninvest, Rabobank, HSBC Securities, James Capel, Marine Midland Bank of New York and National & Grindlays Bank.  He has been ranked No.1 overall in Japanese banks research in Japan by Asiamoney for 6 of the past 9 years and was runner-up in 2015.  He was awarded the coveted Starmine prize as top Japanese bank stock picker in 2012 and 2014 and was runner-up in 2013.  He frequently appears on TV, radio and in international print media as a commentator on Japanese banking.

Senior Bank Analyst - Japanese Banks

Japanese Banks:  Buddy, Can We Spare You a Dime !

Japanese Bank Deposits:  Mountain High, Value Low

Gravity Works As WeWork Doesn't; Now Plan B

Japanese Banks:  When Spades Become Shovels

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

Sumitomo Mitsui Financial Group (8316 JP)

Ever more, ever higher: deposits in Japan keep flooding into the banks as each month passes, reaching an all-time high at the end of April 2021 of ¥859.952 trillion (US$7.88 trillion), according to data provided by the Japanese Bankers Association (JBA).  It was the 175th continuous month of increase, according to the JBA, although the rate of increase on both a MoM (+0.6%) and YoY (+8.2%) basis did not set a new record, reflecting a barely perceptible slowdown in the inflow.According to the Bank of Japan (BoJ), average deposit balances in April 2021 rose +1.5% MoM, or by ¥15.772 trillion (US$144.7 billion), to ¥1,083.032 trillion (US$9.936 trillion); this was also an all-time high level.  On a YoY basis, according to the BoJ data, average deposit balances rose by a remarkable +8.4%, or by ¥83.991 trillion (US$770.56 billion), so well short of last month’s record +8.7% YoY growth rate.What to do with all that cash?  Despite the bankers’ best efforts to lend out those funds to help support an economic recovery, the rate of inflow far surpasses the rate of outflow.  So much so that major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 48.8%, with lending margins remaining under constant downward pressure.  Japanese banks’ investments in Japanese government bonds (JGBs) are currently at their highest level in 5 years, according to Bank of Japan data, even though yields are minimal at best, and negative-yielding in many cases.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/232/original/8300-WR-JBanks-2021-0531-Evermore-JBAData-LDR-MajorvsReg-2017-2021.jpg?1622461040" class="editor-image img-responsive" data-smartkarma-image-id="210232"></figure></section>“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Ever more, ever higher: deposits in Japan keep flooding into the banks as each month passes, reaching an all-time high at the end of April 2021 of ¥859.952 trillion (US$7.88 trillion), according to data provided by the Japanese Bankers Association (JBA).  It was the 175th continuous month of increase, according to the JBA, although the rate of increase on both a MoM (+0.6%) and YoY (+8.2%) basis did not set a new record, reflecting a barely perceptible slowdown in the inflow.According to the Bank of Japan (BoJ), average deposit balances in April 2021 rose +1.5% MoM, or by ¥15.772 trillion (US$144.7 billion), to ¥1,083.032 trillion (US$9.936 trillion); this was also an all-time high level.  On a YoY basis, according to the BoJ data, average deposit balances rose by a remarkable +8.4%, or by ¥83.991 trillion (US$770.56 billion), so well short of last month’s record +8.7% YoY growth rate.What to do with all that cash?  Despite the bankers’ best efforts to lend out those funds to help support an economic recovery, the rate of inflow far surpasses the rate of outflow.  So much so that major banks’ loan to deposit (LDR) ratios have now fallen to historic lows of 48.8%, with lending margins remaining under constant downward pressure.  Japanese banks’ investments in Japanese government bonds (JGBs) are currently at their highest level in 5 years, according to Bank of Japan data, even though yields are minimal at best, and negative-yielding in many cases.“Caveat Emptor!”  (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for the remainder of 2021 and beyond.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Japanese Bank Deposits:  In the Land of Evermore