Company Reports

We are transferring coverage of Mitsubishi UFJ Financial Group, or MUFG, Sumitomo Mitsui Financial Group, or SMFG, Mizuho Financial Group, and Resona Group.

Over the next five years, we expect Resona’s earnings to benefit from interest rate tailwinds in Japan, improving operating leverage that is lowering its cost/income ratio, and from share sale gains. These factors should help Resona’s return on common equity average 12.8% over fiscal 2027-31 (ending March).

Resona Group's first-quarter fiscal 2026 (ending March 2027) net income rose 14% year on year, driven mainly by robust net interest income. It raised its full-year net income guidance by JPY 20 billion to JPY 330 billion and increased its buyback program by JPY 50 billion.

Over the next five years, we expect Resona’s earnings to benefit from interest rate tailwinds in Japan, improving operating leverage that is lowering its cost/income ratio, and from share sale gains. These factors should help Resona’s ROE average 11.6% during the period before easing to 11% in our midcycle forecast as equity sales diminish.

Resona's fiscal 2025 net income grew 21% to JPY 259 billion, exceeding guidance, topped off with JPY 120 billion in share-sale gains, a higher net interest margin, and lower cost/income. Management guides for 20% growth in fiscal 2026 net income to JPY 310 billion.

Resona's December-quarter performance brings cumulative nine-month net profit to JPY 222 billion, making up 92.5% of management's original full-year fiscal 2025 (ending March 2026) profit guidance of JPY 240 billion. Resona has raised its net profit guidance to JPY 250 billion.

We review our assumptions on Resona, given the company's cost guidance and recent improvement in its net interest margin.

Over the next five years, we expect Resona’s earnings to benefit from interest rate tailwinds in Japan, improving operating leverage that is lowering its cost/income ratio, and from share sale gains. These factors should help Resona’s ROE average 11.6% during the period before easing to 10% in our midcycle forecast as equity sales diminish.

Resona’s lack of large overseas operations is a double-edged sword. Unlike the megabanks, it can't greatly expand lending abroad to compensate for the poor returns available in Japanese commercial banking. However, its domestic focus allows Resona to effectively escape stringent Basel III rules on risk weightings, allowing it to act as a potential consolidator of regional banks even if doing so expands its balance sheet and lowers its capital ratios. The acquisition of Kansai Urban Banking and Minato Bank in 2017 expanded Resona's assets and revenue by about 20%. We expect efficiency gains will continue as the former Kansai Urban operations are further integrated with Resona’s former Kinki Osaka operations under Kansai Mirai Bank, and as Kansai Mirai and Minato Bank further integrate their systems with the overall Resona group.

Japanese regional bank Resona's September-quarter net interest income is up 53% year on year. Coupled with share sale gains and contained costs, the cumulative six-month net profit is up 29% to JPY 142.8 billion. The bank is leaving its full-year net profit guidance at JPY 240 billion.

Four Japanese banks—Mizuho, Resona, Sumitomo Mitsui Financial Group, and Sumitomo Mitsui Trust Group—announced results for the first quarter of their fiscal years ended March 2026. Japan’s largest bank, Mitsubishi UFJ Financial Group, will report on Aug. 4.

Resona’s lack of large overseas operations is a double-edged sword. Unlike the megabanks, it can't greatly expand lending abroad to compensate for the poor returns available in Japanese commercial banking. However, its domestic focus allows Resona to effectively escape stringent Basel III rules on risk weightings, allowing it to act as a potential consolidator of regional banks even if doing so expands its balance sheet and lowers its capital ratios. The acquisition of Kansai Urban Banking and Minato Bank in 2017 expanded Resona's assets and revenue by about 20%. We expect efficiency gains will continue as the former Kansai Urban operations are further integrated with Resona’s former Kinki Osaka operations under Kansai Mirai Bank, and as Kansai Mirai and Minato Bank further integrate their systems with the overall Resona group.

Resona reported net profit of JPY 213 billion for the fiscal year ended March 2025, in line with its recently raised guidance. For the year ending March 2026, the bank forecasts profit of JPY 240 billion and plans to pay a dividend of JPY 29 per share.

Resona’s lack of large overseas operations is a double-edged sword. Unlike the megabanks, it can't greatly expand lending abroad to compensate for the poor returns available in Japanese commercial banking. However, its domestic focus allows Resona to effectively escape stringent Basel III rules on risk weightings, allowing it to act as a potential consolidator of regional banks even if doing so expands its balance sheet and lowers its capital ratios. The acquisition of Kansai Urban Banking and Minato Bank in 2017 expanded Resona's assets and revenue by about 20%. We expect efficiency gains will continue as the former Kansai Urban operations are further integrated with Resona’s former Kinki Osaka operations under Kansai Mirai Bank, and as Kansai Mirai and Minato Bank further integrate their systems with the overall Resona group.

Resona raised its earnings guidance for the fiscal year ending March 2025 to JPY 210 billion, up from JPY 175 billion. The upgrade reflects stronger net interest income and fee revenue, gains from sales of policy-oriented stocks, and lower-than-expected credit costs.

Resona’s lack of large overseas operations is a double-edged sword. Unlike the megabanks, it can't greatly expand lending abroad to compensate for the poor returns available in Japanese commercial banking. However, its domestic focus allows Resona to effectively escape stringent Basel III rules on risk weightings, allowing it to act as a potential consolidator of regional banks even if doing so expands its balance sheet and lowers its capital ratios. The acquisition of Kansai Urban Banking and Minato Bank in 2017 expanded Resona's assets and revenue by about 20%. We expect efficiency gains will continue as the former Kansai Urban operations are further integrated with Resona’s former Kinki Osaka operations under Kansai Mirai Bank, and as Kansai Mirai and Minato Bank further integrate their systems with the overall Resona group.

We adjust our Morningstar Uncertainty Ratings for 14 of the 16 Asia, excluding China, stocks we cover after US President Donald Trump announced much more severe tariffs on imports than we or the market were expecting, raising uncertainty over future economic conditions across Asia.

Five major Japanese banks reported aggregate earnings of JPY 4.14 trillion for the nine months from April to December 2024, reaching over 99% of their full-year guidance with three months remaining.

The Bank of Japan raised its policy rate to 0.50% from 0.25%, marking the highest level since 2008, as the country’s persistent deflation shifts toward moderate inflation.

Resona’s lack of large overseas operations is a double-edged sword. Unlike the megabanks, it can't greatly expand lending abroad to compensate for the poor returns available in Japanese commercial banking. However, its domestic focus allows Resona to effectively escape stringent Basel III rules on risk weightings, allowing it to act as a potential consolidator of regional banks even if doing so expands its balance sheet and lowers its capital ratios. The acquisition of Kansai Urban Banking and Minato Bank in 2017 expanded Resona's assets and revenue by about 20%. We expect efficiency gains will continue as the former Kansai Urban operations are further integrated with Resona’s former Kinki Osaka operations under Kansai Mirai Bank, and as Kansai Mirai and Minato Bank further integrate their systems with the overall Resona group.