Japan's biggest banks raise profit outlooks, flag data center risks

Japan's three largest banking groups lifted their annual profit forecasts on November 13, projecting record earnings as higher interest rates supported lending margins. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group also highlighted potential risks from slowing investment in AI data centers.

SMFG increased its profit projection from ¥1.7 trillion to ¥1.9 trillion. An additional ¥220 billion in planned share repurchases brings its buyback program to ¥400 billion for the financial year ending in March 2027. July-September net profit declined 10% to ¥501.8 billion, compared with a year-earlier period that included a ¥94 billion gain from the sale of its Kotak Mahindra Bank stake.

Mizuho's revised annual forecast is ¥1.6 trillion, up from ¥1.4 trillion, while its buyback program doubled to ¥400 billion. Its quarterly profit increased 19% to ¥473.6 billion. MUFG raised its full-year projection from ¥2.7 trillion to ¥2.8 trillion after quarterly net profit rose 10% to ¥821.5 billion.

SMFG Chief Executive Officer Toru Nakashima said a data center investment slowdown could hurt Japan's economy, the global economy and SMFG's results over the next six months. He said the bank had tightened financing criteria, including restricting credit to hyperscalers with high credit standing.

Mizuho CEO Masahiro Kihara identified potentially tougher U.S. data center construction restrictions as a risk that could delay projects and increase development costs. The banks described their direct exposure as limited relative to overall lending. MUFG reported ¥3.3 trillion in data center credit exposure against total credit exposure of ¥180 trillion.