Mizuho Financial Group Stock

Thank you all for taking the time to be here today. As always, today's cover artwork was created by a student from Tokyo University of the Arts. This piece titled Soaring, expresses the spirit of rising higher. Please find details of the artist and theme on the next page.

This year marks Mizuho's 25th anniversary. Over the years, we faced many challenges, but we've overcome them, and our market cap has reached a record high. In April, the market dipped following the Trump tariffs, but it recovered and has remained solid. Following our upward revision in July, we have revised our outlook upward again, and we now expect profit attributable to owners of parent to reach JPY 1.13 trillion for the full year. Our ROE calculated on a trailing 12-month basis stands at 9.3%. However, with our year-end profit outlook now at JPY 1.13 trillion, we expect it to reach the higher end of 10%. And reflecting these strong results, we have announced an additional share buyback of JPY 200 billion.

Overall, uncertainty has eased considerably, but we intend to maintain a cautious stance. On the left, you can see that the global IB market dipped in April, but has since recovered, ending up about USD 5 billion higher than last year. Within that, Mizuho improved its position to 11th place, with our share rising 0.1 percentage point to 2%. In the lower left, banking refers to the primary business and markets represents the secondary business. As we have mentioned before, these businesses complement each other. When volatility rises, activity on the primary side slows while markets contribute to earnings. This chart illustrates that dynamic.

On the right, credit-related cost guidance is now minus JPY 70 billion, and we believe that the JPY 110 billion set aside as forward-looking reserves provides ample coverage.

This page shows the waterfall charts for consolidated net business profits and profit attributable to owners of parent. At the start of fiscal year 2025, our plan was JPY 1.28 trillion in net business profits. We revised this upward in both first quarter and second quarter, and our current outlook is JPY 1.35 trillion. Looking ahead to fiscal year 2027, we had set a target range of JPY 1.4 trillion to JPY 1.6 trillion. Assuming markets remain stable, we believe JPY 1.5 trillion to JPY 1.6 trillion is well within reach. As for full year profit, our initial plan was JPY 940 billion. In first quarter, we revised upward by JPY 80 billion. And in second quarter, thanks in part to tax reversals, by another JPY 110 billion. As a result, our revised outlook now stands at JPY 1.13 trillion.

Our market cap was around JPY 12.2 trillion back in fiscal year 2006. More recently, it has been JPY 12.4 trillion to JPY 12.5 trillion. And today, it stands at about JPY 12.8 trillion, surpassing the previous record high. That said, we know there is still more work ahead, and we remain committed to further enhancing market cap. At the same time, our structure has changed significantly. In the past, we operated as 3 banks and 3 securities firms. Today, we operate under one Mizuho. In terms of our workforce, Mizuho joiners now make up the overwhelming majority. Our earnings structure has also shifted. Overseas revenue has increased from about 10% in the past to 40% today. And in the global IB League table, we have risen to 11th place, up from the 20s in earlier years.

As I mentioned at the last results briefing, our P/B ratio is currently just below 1.2. We are aiming to reach 1.5 in line with our peers in Europe and the U.S.. To achieve that, the key question is how we generate alpha. On the right side of the slide, you can see the 3 pillars: maintaining a sound and stable portfolio, commitment to disciplined financial management, and strengthening the competitive edges of our focused businesses while addressing the challenges ahead.

This is where we've broken down the points I just mentioned in more detail. First, in terms of maintaining a sound and stable portfolio, our strength lies in CIB, both in Japan and overseas. We intend to further expand this earnings base while also reinforcing the individual business, which provides stable income. Interest rate conditions will continue to fluctuate. But to complement customer business earnings, we plan to use our securities portfolio effectively. When conditions stabilize, we will look to build up balances and capture the upside.

From the standpoint of soundness, thorough risk management is critical. As noted earlier, we have more than JPY 100 billion in forward-looking reserves, and we are also strengthening our governance, compliance, AML, CFT and cybersecurity. On disciplined financial management, as you will see later, we are continuously improving asset profitability. At the same time, we are pursuing productivity and efficiency and channeling management resources into our focus business areas. We also remain committed to disciplined financial and capital management.

As for strengthening our competitive edges and addressing challenges, we believe our CIB business, both domestic and global, is a clear strength. By further reinforcing global and regional collaboration, we aim to capture additional upside. In fact, during fiscal year 2025 first half, we have already seen tangible progress in this area. We are also working to strengthen collaboration across the 4 focus areas. In the individual customer segment, mass retail, wealth management and asset management, there are still many challenges, and we intend to address them firmly. Finally, we will continue to pursue inorganic opportunities to further strengthen our focus business areas.

As we've noted many times, our business portfolio is centered on customer business with a relatively high proportion of investment-grade assets. At the same time, under negative interest rate policy, where we could not rely on domestic interest income for growth, we diversified our sources of revenue, increasing fee business. Domestically, we have a very strong corporate customer base.

Overseas, particularly in the Americas, we have built our own business model. With the acquisition of Greenhill, that framework is essentially complete, and we are now in a position to capture synergies. This has also given us a revenue structure that is less dependent on market conditions. On the right side, you can see our bond portfolio, which continues to be managed with a risk-controlled approach.

Looking at JGBs, the notional balance is now much smaller compared with the past. Recently, we have added some medium-term bonds, but overall, the level of average maturity remains quite low. As for foreign bonds, the key factor is how inflation develops in the U.S.. With unemployment rising, interest rates may trend lower, which could reduce earnings in customer business. However, we have built up a significant position in held-to-maturity bonds and the income from those will help offset the decline, providing a balanced structure.

The following pages we have covered previously, so I will move to Page 15, our Americas CIB. For us, this has been the most important area of our overseas IB business, the most profitable and one we believe can positively influence other regions. That is why we have strengthened our presence in the Americas.

In fiscal year 2019, gross profit was USD 2.2 billion. By fiscal year 2024, it has grown to USD 5.2 billion. The acquisition of Greenhill will continue to be a major catalyst going forward, and this expansion has been very deliberate. With revenue now at USD 5.2 billion, we cover about 80% of the products needed in the CIB market already in place. And our CIB ranking has risen to 11th place. From here, our goal is to break into the top 10.

As I've mentioned before, our revenue structure is designed to be resilient to market conditions. Looking at fiscal year 2019 and fiscal year 2024 at the bottom of the slide, you can see that while the revenue levels differ, the overall structure has changed to deliver less volatility and steady earnings. When market volatility is high, primary activity slows, but secondary business offsets the decline. Conversely, when volatility is low, secondary business falls, but primary activity generates solid earnings.

As mentioned earlier, we continue to manage our bond portfolio with caution. For JGBs, we have added some mid- to long-term positions, partly on a trial basis. Even so, the average duration is about 2 years, which we consider a very cautious approach. For foreign bonds, there has been little change. The duration has edged down to 1.7 years. And in the lower right, you can see our held-to-maturity position, which stands at around USD 25 billion.

As we have explained before, the full year impact of rate hikes is about JPY 120 billion based on a beta of roughly 40% for each 25 basis points. Loan deposit income tends to move line with interest rates, meaning that earnings in our customer groups would decrease when rates fall. However, the held-to-maturity portfolio offsets that decline, and overall, the impact of rate cuts has been largely neutralized.

We began structural reforms in fiscal year 2019. I became CEO in fiscal year 2022. And from fiscal year 2023, we launched a 3-year plan. Throughout this period, we have consistently focused on improving asset returns. At the end of March 2019, risk-weighted assets stood at JPY 78 trillion with gross profit at JPY 1.8 trillion, giving us a RORA of 2.4%. By the end of March 2025, risk-weighted assets had risen to just over JPY 85 trillion, a CAGR of 1.6%. Gross profit increased to JPY 2.9 trillion, and RORA improved to 3.5%. This shows significant progress, but it is an ongoing effort. We still see room for improvement, and we will continue working to enhance asset profitability.

On cross shareholdings, we have committed to reducing more than JPY 350 billion in book value for fiscal years '25 to '27, and we are in the process of doing this. For this fiscal year, we sold JPY 36.7 billion and including agreements for sales, the total comes to JPY 93.6 billion, which is broadly in line with our expectations. For deemed holdings against our outlook of JPY 200 billion for fiscal years 2025 to 2027, we have already reduced JPY 173.4 billion, representing significant progress.

Whether we set a new target will be considered going forward. The ratio to net assets currently stands at 30.7%. With rising stock prices, it is difficult to keep pace but our intention is to bring this below 20% by the end of March 2028. On profitability, shown at the bottom right, we have explicitly set the benchmark at ROE of 10%. This represents a change from the previous standard, and we are now applying 10% as the threshold.

On productivity and expenses compared with fiscal year 2018, expenses have increased by JPY 0.4 trillion, while gross profits have risen by JPY 1.14 trillion. Most of the expense increase comes from personnel and IT systems. System-related spending, though, has not been indiscriminate. Rather, it reflects investments in areas where we could not invest during our fundamental structure reform that began in fiscal year 2018. Overall, while expenses have risen, gross profit has grown even more, and the expense ratio has improved from 78.8% in fiscal year 2018 to 62.5% today. Our target is to keep it around 60%.

On the right side of the slide, you can see that we are allocating costs to strengthen our focus business areas and governance, especially overseas in mass retail to build our customer base and brand value, invest in human capital and advanced use of AI and DX. At the same time, efficiency and productivity remain critical. We are reviewing products and services, and we are also rationalizing the use of third parties. I issued a company-wide directive to list up every case of third-party usage, such as IT vendors. I then said that we would be cutting that usage by 100%. Of course, that wasn't realistic, but the method to the madness here is that by setting such a bold target, we avoided the usual conservative 5% to 10% and instead reach 30%.

We will continue to plan carefully, reduce this 30% in a sustainable way and then push further to cut costs even more. Looking ahead, we will put clear plans in place. Since third parties, in some cases, act as substitutes for employees, they cannot simply be cut overnight. Even so, we will execute a structured plan to achieve a 30% reduction, which will lower costs, and we will not stop there. Our intention is to go further, cutting beyond that 30% to drive additional savings. Finally, as shown at the bottom right, the number of employees has declined while gross profit has increased, meaning productivity has improved.

On the use of AI, we are seeing real progress in applying AI across a wide range of areas. We are currently running multiple POCs and exploring additional ways to leverage AI. While we initially expected to invest about JPY 50 billion over 3 years, the actual figure is likely to be closer to JPY 100 billion. Importantly, when a POC does not deliver results, we terminate it immediately and record it as a one-off loss, ensuring efficiency in how we move forward. We are also advancing our partnership with UPSIDER. We have begun promoting their cards, particularly to midsized and smaller companies, and we are already seeing the impact of UPSIDER's capabilities.

On shareholder returns, as you know, we raised the dividend by JPY 5 to JPY 145. For share buybacks, we announced a JPY 100 billion acquisition in May. In November, we decided to add another JPY 200 billion, bringing the total planned buybacks for the full year to JPY 300 billion. As shown in the middle of the slide, our net income forecast is JPY 1.13 trillion. We will continue to review this flexibly, taking into account business conditions and the external environment. We will consider shareholder returns in light of growth investment opportunities and market conditions, ensuring an appropriate total payout. For now, with JPY 300 billion in buybacks and a dividend of JPY 145, the total payout ratio stands at 58%.

As mentioned earlier, our total payout ratio has reached 58%. We have also consistently emphasized our commitment to raising EPS. The previous record high was JPY 551, and we are now at JPY 456. We will continue driving EPS higher.

These are our focus business areas, which you are all familiar with. The top half is retail and at the bottom half is wholesale. Our goal is to capture synergies across these areas to further strengthen business.

In fiscal year 2023, gross profit was JPY 2.6 trillion. And in fiscal year 2024, it rose to JPY 2.9 trillion. Breaking this down, JPY 0.16 trillion came from areas not affected by interest rates, JPY 0.11 trillion was driven by rate hikes and banking operations contributed another JPY 200 billion, bringing the total to JPY 2.9 trillion. As I mentioned earlier, in the bond portfolio, particularly in yen assets, once conditions stabilize, adding a certain amount can both supplement customer business earnings and provide additional upside.

First, on enhancing the competitiveness of Japanese companies. We have been very successful in generating and capturing corporate actions with notable growth in the mid-cap segment. We have also provided significant risk capital to innovative companies. As a result, gross profit in this area has increased 11% YoY. Next, on the global CIB business. In the Americas, the strengthening of our CIB operations has advanced further with Greenhill. We also recognize once again the complementary nature of revenues between banking and markets. The gross profit is up 10% YoY.

Here, you can see the IB league tables for both Japan and overseas. I don't intend to get carried away by rankings. And frankly, I sometimes ask myself, so what? But this time, for the first time, we reached #1 in ECM. Mizuho Securities was originally built as a debt house. So our strength has always been in debt. ECM, on the other hand, had been slower to grow and struggled to climb the league tables. Achieving #1 for the first time is, therefore, very meaningful for us. Still, I remind everyone not to get overly excited since rankings can easily change. What we can say is that we have built a certain level of capability.

On the right side, you see the overseas picture. In global CIB, our overall league table position is 11th. Looking at the breakdown below, the Americas account for about 70% by region. M&A represents about 50% by product. The acquisition of Greenhill has been highly significant in strengthening these areas. As a result, our M&A league table position has risen to 24th, and we aim to move higher. Overall, our global league table share has reached 11th, which we view as a very positive outcome.

On corporate actions among Japanese companies, IB revenues have grown steadily. From September '23 to September '25, CAGR for revenue from large corporates was 27%, while mid-cap and smaller companies was 67%, a very significant expansion. On the right, you can see that the pipeline of large deals has increased not only with our core clients, but also with noncore clients. In M&A for mid-cap companies, our involvement rate used to be relatively low, but in first half of fiscal year 2025, it has risen to above 30%. This shows that we are now gaining meaningful traction in this area.

At the bottom left, IR and SR have also expanded with the related value chain growing at a CAGR of 43%. It's important to note that revenues are generated not only from transfer agent clients, but also from non-agent clients. On the right is the balance of loans outstanding to innovative companies, which has also increased by 16%.

In our global CIB business in the Americas, advisory fees from large deals have grown significantly. For the top 10 deals, fees rose from USD 22 million in 2022 to USD 96 million in 2024. On the right, you can see an example, Skechers, where we served as the exclusive sell-side financial adviser. This is the kind of transaction that would have been hard to imagine in the past, but we are now seeing such opportunities emerge. At the bottom, you can also see that cross-border deals are increasing, and our pipeline now includes a wide range of transactions.

In the retail segment, our online banking app, MAU, continues to grow. We have launched a new rewards program and made progress in our partnership with Rakuten. Still, we believe our mass retail strategy needs to be further advanced with improvements required on both the channels, operations and service or branding sides. Encouragingly, gross profit is up 8% and new account openings have increased by 6%, showing good progress, though more remains to be done.

On asset and wealth Management in Japan, NISA accounts are steadily increasing, and we achieved strong sales of about JPY 45 billion in Golub Capital's private asset and private credit fund. This is a significant achievement, but we must continue to raise the proportion of stable earnings. In Wealth Management, we need to strengthen the sales capabilities of our people. And in asset management, we must enhance our in-house investment capabilities. I will share more on this later.

On our collaboration with Rakuten, we have established a new asset management company called MiRaI. This initiative is distinctive in that we do not engage in push-style sales. Instead, we listen carefully to clients. And only when they ask, what should I do, then we recommend suitable products. The company is still small, but AUM has reached JPY 6 billion. In the middle of the slide, you can see that the number of deals we originated and then distributed through Rakuten Securities has increased significantly.

On the right, access to Rakuten securities via our banking app has also grown, another representation of our deepening partnership. At the bottom, card issuance has expanded about eightfold. The Mizuho Rakuten card has a very high usage rate and the spending volume is far greater than with our previous cards. While we must not rely solely on this, the ability to issue a card that connects directly into Rakuten's ecosystem clearly has meaningful impact.

With the acquisition of Rakuten Securities, we now have channels that reach every customer segment, and we can provide both face-to-face and digital solutions. This is a major strength. That said, within Mizuho, we believe we must further strengthen our face-to-face capabilities, enhancing sales skills, expertise, conversational ability and the human touch. On the asset management side, our strength lies in having a solid base in both public funds and pension business. In particular, we are #1 in the industry in terms of DC participants.

We also have solid in-house capabilities in domestic equities and bonds. Where we lack in-house capacity, we bring in strong external partners. Golub Capital is one example, and T. Rowe Price with its target date funds is another. Partnering with such high-quality managers is a distinctive feature of our approach. At the same time, we aim to further enhance our in-house capabilities. We need to develop large-cap equity funds domestically and in foreign equities rather than doing everything, we plan to introduce more thematic funds.

Moving on to corporate culture. As shown on both sides of the slide, our focus is on drawing out employees' motivation and ensuring that our strategies allow them to experience success. When this cycle continues, a positive culture emerges. And once that culture takes root, motivation rises further, driving growth. We have been working steadily on culture reform. As promised, we aim to raise both the engagement score and the inclusion score to 65%. I am pleased to report that we have exceeded those levels. Of course, we do not intend to stop here. We will continue to push higher. Overall, we feel that our culture has made significant progress.

In terms of enhancing our brand value, we have been carrying out a variety of initiatives. As you know, we support Breaking and are a major partner of the Japan National Soccer team. You may also have seen our corporate communications in various media featuring Mr. Ryo Yoshizawa and Ms. Natsuki Deguchi. Overseas, we recently sponsored a sumo tournament at the Royal Albert Hall in London, which received considerable attention. In the U.S., we are sponsoring the New York leg of the Mizuho Americas Open, part of the LPGA Tour. Through these initiatives, we aim to enhance our brand value both domestically and internationally.

As outlined here, we will continue to sharpen our competitive edges and address challenges decisively with the goal of raising ROE and PER. We also aim to push EPS beyond the previous record of JPY 551 with ongoing share buybacks. On risk, we recognize the many factors involved, and we will strengthen predictive risk management to ensure the soundness and stability of our portfolio. As we mark our 25th anniversary, we are determined to transform into a truly global financial institution. By reinforcing collaboration, both domestically and internationally, we will pursue these 3 priorities with focus and discipline.

Thank you for your continued support of Mizuho. This concluded my presentation.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]