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:  Remember, Remember, the Thrift of November

Japanese Banks: The ¥44 Trillion Free Lunch

🇯🇵 JAPAN MARKET UPDATE • Hit the BoJ Bid and Wait for the Absolute Value Opportunity

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

Windamee Research

Japanese Banks

Thematic (Sector/Industry)

Sumitomo Mitsui Financial Group (8316 JP)

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) indicate that, while loan growth remains strong in annual terms, loan outstandings have eased back to where they were in May.  In essence, much of the increase in lending by the major banks seen between March and June was then reversed between July and October.
Peak lending occurred in June, when outstanding loans reached ¥535.407 trillion (US$5.10 trillion).  Since then, the rate of year-on-year (YoY) growth has remained just above +6%, thanks to exceptionally strong loan demand in the March-June period which pushed overall loan balances by as much as ¥34.4 trillion (US$331.0 billion) YoY.  However, total loan outstandings thereafter fell every month between July and October, bottoming out in November when the major banks finally registered an increase in lending for the first time in five months.  Month-on-month (MoM) growth in regional bank lending has slowed to a comparative trickle, with loan outstandings falling 0.2% MoM in November.  This does not bode well for 2H FY3/2021 banking sector profits generally, especially as credit costs are continuing to ‘normalise’ even as revenues and margins  -  not to mention shareholder returns  -  remain under pressure.
“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

The latest data from both the Bank of Japan (BoJ) and the Japanese Bankers Association (JBA) indicate that, while loan growth remains strong in annual terms, loan outstandings have eased back to where they were in May.  In essence, much of the increase in lending by the major banks seen between March and June was then reversed between July and October.
Peak lending occurred in June, when outstanding loans reached ¥535.407 trillion (US$5.10 trillion).  Since then, the rate of year-on-year (YoY) growth has remained just above +6%, thanks to exceptionally strong loan demand in the March-June period which pushed overall loan balances by as much as ¥34.4 trillion (US$331.0 billion) YoY.  However, total loan outstandings thereafter fell every month between July and October, bottoming out in November when the major banks finally registered an increase in lending for the first time in five months.  Month-on-month (MoM) growth in regional bank lending has slowed to a comparative trickle, with loan outstandings falling 0.2% MoM in November.  This does not bode well for 2H FY3/2021 banking sector profits generally, especially as credit costs are continuing to ‘normalise’ even as revenues and margins  -  not to mention shareholder returns  -  remain under pressure.
“Caveat Emptor!” (May the Buyer Beware) remains our advice to would-be investors in Japanese bank stocks for 2021 and beyond.

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Japanese Bank Lending: Losing Momentum