Financial System Report Annex Series

FSR A
inancial
ystem

eport

nnex

Financial Results of Japan’s Banks
for Fiscal 2018

FINANCIAL SYSTEM AND BANK EXAMINATION DEPARTMENTBANK OF JAPANSEPTEMBER 2019

The total of major banks, regional banks, and shinkin banks covered in this Report is as follows (as at
March 31, 2019).
Major banks comprise the following 10 banks: Mizuho Bank; MUFG Bank; Sumitomo Mitsui Banking
Corporation; Resona Bank; Saitama Resona Bank; Mitsubishi UFJ Trust and Banking Corporation;
Mizuho Trust and Banking Company; Sumitomo Mitsui Trust Bank; Shinsei Bank; and Aozora Bank.
Regional banks comprise the 64 member banks of the Regional Banks Association of Japan (Regionalbanks I) and the 40 member banks of the Second Association of Regional Banks (Regional banks II).
Shinkin banks are the 251 shinkin banks that hold current accounts at the Bank of Japan.
Please contact the Financial System and Bank Examination Department at the e-mail address below torequest permission in advance when reproducing or copying the contents of this Report for commercial
purposes.
Please credit the source when quoting, reproducing, or copying the contents of this Report for
non-commercial purposes.
Financial Institutions Divisions I and II
Financial System and Bank Examination Department, Bank of Japan
post.fsbe2@boj.or.jp

Background
The Bank of Japan issues the Financial System Report semi-annually with theobjectives of assessing the stability of Japan's financial system from amacroprudential perspective and enhancing communication with concerned
parties with respect to financial stability issues. The Report provides a regular andcomprehensive assessment of the financial system.
The Financial System Report Annex Series supplements the Financial System
Report by providing more detailed analysis and insight into a selected topic. This
paper covers the financial results of Japan's banks for fiscal 2018 to provide anannual analysis.

Abstract
The characteristics of the financial results of Japan's banks for fiscal 2018 aresummarized in the three paragraphs below.
First, net income decreased for all types of banks: major banks, regional banks,and shinkin banks. For all types of banks, net income was pushed down mainly by
the continued shrinking of domestic lending margins and the upward turn in credit
costs.
Second, pre-provision net revenue (PPNR) (excluding trading income), whichshows core profitability, continued to follow a declining trend for all types of banks,
while that for shinkin banks, which was at the lowest level since the bursting of the
bubble economy, increased slightly. PPNR (excluding trading income) was
pushed down by declines both in loan-related net interest income owing toshrinking domestic lending margins and in net non-interest income mainly due to
weak sales of investment trusts. A decline in securities-related income at regionalbanks also pushed down their PPNR (excluding trading income).
Third, the capital adequacy ratios of financial institutions have been sufficiently
above the regulatory requirements, although they have declined moderately.

iContents
I. Outline of Financial Results of Japan's Banks for Fiscal 2018
A. Profits and Losses
B. Profit Levels from a Long-Term Perspective
C. Balance Sheets

II. Financial Results of Japan's Major Banks and Regional Banks for
Fiscal 2018
A. Core Profitability
1. Net Interest Income
2. Interest Rate Spreads on Loans and Loans Outstanding
3. Interest Rate Spreads on Securities
4. Net Non-Interest Income
5. General and Administrative Expenses
B. Realized and Unrealized Gains/Losses on Securities Holdings
1. Realized Gains/Losses on Securities Holdings
2. Unrealized Gains/Losses on Securities Holdings
C. Credit Costs and Non-Performing Loans
1. Credit Costs
2. Non-Performing Loans
3. Loan-Loss Provisions
D. Capital Adequacy Ratios

Box 1: Income structures of major financial groups
Box 2: Payouts to shareholders by regional banksiiIII. Financial Results of Japan's Shinkin Banks for Fiscal 2018
A. Core Profitability
1. Net Interest Income
2. Interest Rate Spreads on Loans and Loans Outstanding
3. Interest Rate Spreads on Securities
4. Net Non-Interest Income
5. General and Administrative Expenses
B. Realized and Unrealized Gains/Losses on Securities Holdings
1. Realized Gains/Losses on Securities Holdings
2. Unrealized Gains/Losses on Securities Holdings
C. Credit Costs and Non-Performing Loans
1. Credit Costs
2. Non-Performing Loans
3. Loan-Loss Provisions
D. Capital Adequacy Ratios

Reference: Developments in Financial Markets
Glossaryiii

I. Outline of Financial Results of Japan's Banks for Fiscal 20181
A. Profits and Losses
Net income for fiscal 2018 at major financial groups was about 2.1 trillion yen, decreasing by 23.4
percent from the previous year. The factors behind the decline in net income were (1) a continued
decline in net interest income owing to the shrinking domestic lending margins, (2) a decline in net
non-interest income mainly due to weak sales of investment trusts and improved valuation
methods of derivatives, (3) an increase in credit costs mainly caused by loan-loss provisions todomestic and overseas exposures to some large companies, and (4) an increase in realized
losses on securities holdings. Meanwhile, one-time losses incurred by a financial group led to alarger decline in net income. For details regarding the income structures of major financial groups,
see Box 1.
Net income for fiscal 2018 at major banks (on a non-consolidated basis) was about 1.5 trillion yen,a decrease of 30.0 percent from the previous year.

I-A-1: Main profit and loss items at major financial groups and banks
100 mil.yen,%
Major Financial Groups
FY2018y/y chg.

Major Banks (non-consolidated)
y/y % chg.

FY2018y/y chg.

y/y % chg.

Net interest income

47,718-588-1.2

33,925-399-1.2

Net non-interest income

53,242-1,418-2.6

22,286-1,820-7.6

General and administrative expenses-68,385

+557

-0.8

-37,227+94-0.3

PPNR (excluding trading incom e)

36,681-489-1.3

18,984-2,125-10.1

Realized gains/losses on bondholdings

-802

-705

――

-608

-486

――

Realized gains/losses on stockholdings

5,404

-225

――

3,875

-2,244――-1,755――

1,176-1,764――――(-4bp)(+6bp)――――

Credit costs(Credit cost ratio)-1,703――――――

Other profit and loss items-9,905-6,014-5,057-1,990Net incom e before incom e taxes

29,675-9,187-23.6

18,369-8,608-31.9

Tax-related expenses-6,587+1,883-22.2-3,716+2,339-38.6

Net incom e

21,334-6,519-23.4

14,653-6,269-30.0

Notes: 1. Regarding credit costs, negative numbers represent a rise in costs while positive numbers represent an increase inreversals.
2. For major financial groups, PPNR (excluding trading income) includes profits/losses on investments in affiliates.
Some items for which there exist no data based on financial groups are calculated using banks' data on a
non-consolidated basis.
Sources: Published accounts of each financial group; BOJ.

1

Figures provided in Chapters I and II are calculated on a non-consolidated basis unless otherwise noted.
1

Net income for fiscal 2018 at regional banks was about 0.7 trillion yen, a 20.8 percent decline fromthe previous year. The decline in net income was attributed to (1) a continued decline in net
interest income owing to shrinking domestic lending margins, (2) a decline in net non-interest
income mainly due to weak sales of investment trusts, and (3) an increase in credit costs. On theother hand, the level of net income was supported by a decline in general and administrative
expenses as well as a decrease in the amount by which realized losses exceeded gains on
bondholdings.
Net income for fiscal 2018 at shinkin banks was about 0.2 trillion yen, a decrease of 12.1 percent
from the previous year. This was attributed not only to a continued decline in net interest income
due to shrinking lending margins but also to an increase in credit costs and a decrease in theamount by which realized gains exceeded losses on stockholdings. On the other hand, the level ofnet income was supported by a decline in general and administrative expenses.

I-A-2: Main profit and loss items at regional banks and shinkin banks
100 mil.yen,%
Regional banks (non-consolidated)
FY2018y/y chg.

Shinkin banks

y/y % chg.

FY2018y/y chg.

y/y % chg.

Net interest income

36,306-1,052-2.8

15,374-70-0.5

Net non-interest income

5,104

-259

-4.8

572

-73

-11.2

General and administrative expenses-29,268

+524

-1.8

-12,932

+248

-1.9

PPNR (excluding trading incom e)

12,142

-787

-6.1

3,015

+106

+3.7

Realized gains/losses on bondholdings

-313

+874

――

378

-44

――

Realized gains/losses on stockholdings

2,493

-108

――

340

-199

――

Credit costs-3,288-2,238

――

-483

-273

――

(Credit cost ratio)(13bp)(+9bp)――(7bp)(+4bp)

――

-155

+14

――

-167

-19

――

Net incom e before incom e taxes

10,880-2,245

-17.1

3,082

-430

-12.2

Tax-related expenses-3,702

-31

+0.8

-761

+110

-12.7

Net incom e

7,465-1,957

-20.8

2,321

-319

-12.1

Other profit and loss items

Note: Regarding credit costs, negative numbers represent a rise in costs while positive numbers represent an increase inreversals. From fiscal 2018, the definition of credit costs has been clarified, adding up the year-on-year change in thenegative values of credit costs: a decrease of 3,000 million yen and 7,100 million yen for regional banks and shinkinbanks, respectively.
Source: BOJ.

2

B. Profit Levels from a Long-Term Perspective
Net income for fiscal 2018 for major banks turned down both on a consolidated andnon-consolidated basis. Net income for regional banks and shinkin banks declined for the thirdand fourth consecutive year, respectively.
From a longer-term perspective, the net income levels for all types of banks bear comparison withthose before the failure of Lehman Brothers and even before the bursting of Japan's bubble
economy in the early 1990s.

I-B-1: Net income
Major financial groups
5

Major banks (non-consolidated)tril.yen

4

H2
H1
FY

4
3

tril.yen

2

2

0

1
-2

0
-1

H2
H1
FY

-4

-2
-6
FY 83

-3
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

88

93

03

08

13

18

08

13

18

Shinkin banks

Regional banks
298tril.yen

0.4

tril.yen

0.3
0.2

1

0.1

0.0

0

-0.1
H2
H1
FY

-1

-2
FY 83

88

-0.2

93

98

03

08

13

18

Source: BOJ.

3

-0.3

FY

-0.4
FY 83

88

93

98

03

With regard to core profitability, PPNR (excluding trading income) at major banks for fiscal 2018
marked a decline of 10.1 percent, decreasing for the fourth consecutive year, and registered onlyaround 70 percent of the level seen four years ago. At regional banks, PPNR (excluding trading
income) showed a decrease of 6.1 percent from the previous year, turning down again. At shinkinbanks, such profits marked a small increase of 3.7 percent from the previous year.
From a longer-term perspective, amid the continued decline in domestic net interest income, thelevels of PPNR (excluding trading income) for all types of banks remain on a downward trend andare at their lowest level since the bursting of the bubble economy.

I-B-2: PPNR (excluding trading income)4.5

tril.yen

2.5

H2
H1

4.0

Shinkin banks

Regional banks

Major banks
tril.yen

1.0

H2
H1

3.5

2.5

2.0

FY

2.0

0.8

1.5

0.6

1.0

0.4

0.5

0.2

3.0

tril.yen

1.5
1.0

0.5
0.0
FY89

94

99

04

09

14

18

0.0
FY 89

94

99

04

Source: BOJ.

4

09

14 18

0.0
FY 89

94

99

04

09

14 18

C. Balance Sheets
Looking at developments in balance sheets for fiscal 2018 at major banks, total assets increased
by 24.9 trillion yen as cash and due from banks, including current account balances at the Bank ofJapan, loans, and foreign securities, increased. On the liability side, the main increase was indeposits.
I-C-1: Main balance sheet items of major banks
tril.yen
End-Mar.
2019
Loans and bills
discounted
Domestic
business
sectorInternational
business
sectory/y chg.

Change fromend-Sep. 2018

End-Mar.
2019

312.5

+8.4

+1.1 Deposits + NCD

213.7

+3.1

+3.3

98.9

+5.3

-2.2

Securities

130.4

+0.1

JGBs

44.4

-6.4

-2.9

Stocks16.0

Foreignsecurities

Change fromend-Sep. 2018y/y chg.

528.4

+25.2

+15.4

418.6

+13.8

+9.5

109.8

+11.5

+5.9

-2.0 Loans from BOJ

24.1

-1.9

-0.9

Due to trust
accounts

16.7

+0.9

+1.0

-1.8

-1.9 Other liabilities

131.4

+1.0

-8.5

49.8

+6.2

+1.6 Total liabilities

700.6

+25.2

+6.9

Cash and duefrom banks

202.2

+14.0

+4.9 Total net assets

34.0

-0.3

-0.6

Other assets

89.5

+2.5

+2.3

Retainedearnings

12.7

+0.4

-0.2

Total assets

734.6

+24.9

+6.3

Net unrealized
gains/losses
on securities

5.8

-0.5

-0.4

Domestic
business
sectorInternational
business
sector

Source: BOJ.

Total assets at regional banks increased by 7.3 trillion yen as loans as well as cash and due frombanks, including current account balances at the Bank of Japan, increased while Japanese
government bonds (JGBs) decreased. On the liability side, the main increase was in deposits.

I-C-2: Main balance sheet items of regional banks
tril.yen
End-Mar.
2019

y/y chg.

Change fromend-Sep. 2018

End-Mar.
2019

Loans and bills
discounted

262.0

+8.6

+4.9 Deposits + NCD

Securities

79.9

-5.7

-4.9

JGBs

19.2

Cash and duefrom banks

y/y chg.

Change fromend-Sep. 2018

345.5

+4.9

+2.8

Current
deposits

187.4

+9.0

+7.4

-5.7

-3.7 Other liabilities

35.8

+2.4

-0.1

49.9

+4.1

+3.0 Total liabilities

381.4

+7.3

+2.6

Other assets

12.1

+0.3

-0.6 Total net assets

22.5

+0.0

-0.3

Total assets

403.9

+7.3

+2.3

3.5

-0.4

-0.4

Source: BOJ.

5

Net unrealized
gains/losses
on securities

With regard to shinkin banks, total assets increased by 3.0 trillion yen as cash and due from banks,loans, and securities excluding JGBs increased. On the liability side, the main increase was indeposits.
I-C-3: Main balance sheet items of shinkin banks
tril.yen

End-Mar.
2019

End-Mar.
2019

y/y chg.

y/y chg.

Loans and bills
discounted

71.7+1.0 Deposits + NCD

142.9

+2.5

Securities

43.1

+0.7

54.5

+3.2

JGBs

6.8

-0.9 Other liabilities

4.7

+0.2

Cash and duefrom banks

38.9+1.2 Total liabilities

147.5

+2.7

Other assets

3.1+0.1 Total net assets

9.2

+0.3

Total assets

156.7

0.8

+0.1

Current deposits

Net unrealized
gains/losses
on securities+3.0

Source: BOJ.

6

II. Financial Results of Japan's Major Banks and Regional Banks for
Fiscal 2018
This chapter analyzes banks' core profitability (net interest income, net non-interest income, andgeneral and administrative expenses), realized and unrealized gains/losses on securities holdings,
credit costs and non-performing loans, as well as capital adequacy ratios. The financial results ofshinkin banks are analyzed in Chapter III.

A. Core Profitability
1. Net Interest Income
Net interest income at major banks for fiscal 2018 decreased by 1.2 percent from the previous
year. In the domestic business sector, securities-related income increased owing to the rise instock dividend yields, while loan-related income continued to decrease due to narrowing interest
rate spreads on loans. On the other hand, in the international business sector, loan-related income
continued to increase.
Net interest income at regional banks for fiscal 2018 marked a 2.8 percent decline from theprevious year. Loan-related income continued to decrease due to narrowing interest rate spreads
on loans, and securities-related income also declined reflecting the redemption of JGBs withrelatively high yields.

II-A-1: Net interest income
Major banks
6
5

tril.yen

Regional banks

OthersSecurities-related
Loan-related
Net interest income

6tril.yen

5

4

4

3

3

2

2

1

1

0

0

-1
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-1
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: Loan-related = (average loans outstanding) * (interest rate spreads on loans). Securities-related = (average
outstanding securities holdings) * (interest rate spreads on securities).
Source: BOJ.

7

2. Interest Rate Spreads on Loans and Loans Outstanding(1) Interest Rate Spreads on Loans
Interest rate spreads on loans in the domestic business sector continued to narrow at both majorbanks and regional banks as the decline in interest rates on loans exceeded the decline in funding
rates under the prolonged low interest rate environment.
Interest rate spreads on loans in the international business sector at major banks were more orless unchanged as both interest rates on loans and funding increased, reflecting policy rate hikes
in the United States.

II-A-2: Interest rate spreads on loans
Major banks (domestic business sector)
2.5

%

2.0

Regional banks (domestic business sector)
2.5Interest rate on loans
Funding cost rate
Interest rate spreads on loans

%

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

-0.5
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18-0.5
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18Major banks (international business sector)
6 %
5
4
3

2
1
0
-1
-2
-3
-4
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: In calculating the interest rate spreads, interest expenses on interest rate swaps are deducted from funding costs.
Source: BOJ.

8

(2) Loans Outstanding by Lending Rate
Looking at developments in loans outstanding by lending rate (yen loans in domestic branches) atboth major banks and regional banks, those with low lending rates continued to increase.

II-A-3: Changes in loans outstanding by lending rate(from the end of March 2015 to the end of March 2019)
Major banks
25tril.yen

20
15

Regional banks

End of March 2018→End of March 201925
End of March 2017→End of March 201820
End of March 2016→End of March 2017
End of March 2015→End of March 201615
End of March 2015→End of March 2019 total

10

10

5

5

0

0

-5

-5

-10

tril.yen-10
less0.501.001.502.002.50than 0.250.751.251.752.25- %
0.25

less
0.501.001.502.002.50than 0.250.751.251.752.25- %0.25

Note: The data are for yen loans outstanding in the domestic business sector (excluding loans to the financial sector) basedon the amount outstanding at month-end.
Source: BOJ.

II-A-4: Changes in proportion of loans outstanding by lending rate(from the end of March 2015 to the end of March 2019)
Regional banks

Major banks
25

%

20

%

End of March 201920

End of March 201815

End of March 201715

End of March 2016
End of March 2015

10

10

5

5

0

0

less
0.501.001.502.002.50than 0.250.751.251.752.25- %
0.25

less
0.501.001.502.002.50than 0.250.751.251.752.25- %0.25

Note: The data are for yen loans outstanding in the domestic business sector (excluding loans to the financial sector) basedon the amount outstanding at month-end.
Source: BOJ.

9

(3) Factors behind Changes in Loan-Related Net Interest Income (Loan
Outstanding and Interest Rate Spread)
Looking at the changes in net interest income from domestic lending activities (= loans
outstanding * interest rate spreads on loans) over the last year, most banks faced a decrease in
net income, although their loans outstanding increased. This suggests that a narrowing of interest
rate spreads on loans is continuing to push down net income.

II-A-5: Relationship between changes in loans outstanding and loan-related net interest income(major and regional banks, domestic business sector)
Vertical axis: loan-related net interest income,y/y % chg.(from FY2017 to FY2018)
25
20
15
10
5
0
-5

-10
-15
-20

-25
-25 -20 -15 -10 -5
05
10 15 20 25
Horizontal axis: average amount of loans outstanding,y/y % chg.(from FY2017 to FY2018)

Notes: 1. The data for loans outstanding do not include foreign currency-denominated impact loans.
2. Loan-related net interest income = (average amount of loans outstanding) * (interest rate spreads on loans).
3. Some banks with special factors, such as mergers and acquisitions, are excluded.
Source: BOJ.

10

3. Interest Rate Spreads on Securities
Interest rate spreads on securities were more or less unchanged on the whole at major banks as
stock yields rose on the back of favorable corporate results, while foreign-currency funding rates
increased. Such spreads on securities at regional banks were also more or less unchanged.

II-A-6: Interest rate spreads on securities
Major banks
2.5

Regional banks

%

2.5

%

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

-0.5

-0.5

-1.0

-1.0

-1.5
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-1.5
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Interest rate on securities
Funding cost rate
Interest rate spreads on securities
Interest rate spreads on securities(excluding profits and losses from investment trusts
due to cancellations)Interest rate on securities
Funding cost rate
Interest rate spreads on securities
Interest rate spreads on securities(excluding received dividents at some banks)

Note: In calculating the interest rate spreads, interest expenses on interest rate swaps are deducted from funding costs.
Source: BOJ.

II-A-7: Decomposition of interest rate spreads on securities by product type
Major banks
2.5

Regional banks
2.5 %

%

2.0

2.0

1.5

1.5

1.0

1.0

0.5

0.5

0.0

0.0

-0.5
FY 06 07 08 09 10 11 12 13 14 15 16 17 18-0.5
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

Investment trusts,etc.
Municipal bonds

Stocks
JGBs

Foreign securities
Total

Corporate bonds

Notes: 1. Some banks are excluded due to a lack of time-series data.
2. For major banks, the rises in interest rate spreads on stocks in fiscal 2016 and 2018 reflect received dividends fromsubsidiaries at some banks.
Source: BOJ.

11

II-A-8: Interest rates on securities holdings and amounts outstanding by product type (at month-end)
Major banks
6 %year 5200 tril.yen

5

160

4

120

3

80

2

1

40

1

0
FY 06 07 08 09 10 11 12 13 14 15 16 17 18
JGBs
StocksStocks (excluding received dividends at some banks)
Foreign securities
Corporate bonds

0

4
3

2

0

FY 13

14

15

16

17

18

Investment trusts, etc.(lhs)
Stocks (lhs)
Foreign securities (lhs)Corporate bonds (lhs)
Municipal bonds (lhs)
JGBs (lhs)
Domestic bonds duration(rhs)

Regional banks
6

%

120

5

100

4

80

3

60

2

40

1

20

0
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

0FY

tril.yenyear 54
3

2

JGBs
StocksForeign securities
Corporate bonds

1
0
13

14

15
16
17
Investment trusts,etc.(lhs)
Stocks (lhs)
Foreign securities (lhs)Corporate bonds (lhs)
Municipal bonds (lhs)
JGBs (lhs)
Domestic bonds duration (rhs)Note: In calculating interest rates, some banks are excluded due to a lack of time-series data.
Source: BOJ.

1218

4. Net Non-Interest Income
Net non-interest income decreased by 7.6 percent from the previous year at major banks.
Specifically, gains related to foreign exchange and derivative transactions decreased mainly due
to improved valuation methods of derivatives, while income from fees and commissions was moreor less unchanged as the international business sector saw an increase in income from fees andcommissions associated with deposits and lending, while the domestic business sector saw weaksales of investment trusts. Net non-interest income at regional banks decreased by 4.8 percent
from the previous year, due to declines both in income from fees and commissions and in gains
related to foreign exchange and derivative transactions.

II-A-9: Net non-interest income
Major banks
3.0

Regional banks

tril.yen

0.8 tril.yen

0.7

2.5

0.6
2.0

0.5
0.4

1.5

0.3

1.0

0.2

0.5

0.1

0.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

0.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Gains related to foreign exchange and derivative transactions and others

Net fees and commissions

Source: BOJ.

II-A-10: Income from fees and commissions (domestic business sector)
Major banks
1.2

Regional banks

tril.yen

1.2

tril.yen

1.0

1.0

0.8

0.8

0.6

0.6

0.4

0.4

0.2

0.2

0.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

0.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Arrangement of syndicated loans and securitization

Underwriting and registration of bonds

Sales of insurance products

Sales of investment trusts

Foreign exchange businessNote: Among items of income from fees and commissions, the 5 items listed above are counted.
Source: BOJ.

13

II-A-11: Income from fees and commissions atmajor banks (by domestic andinternational business sector)
3.0

tril.yen

%

2.5
2.0

II-A-12: Income from fees and commissions in
the international business sector at major
banks
35

0.8

30

0.7

25

0.6

20
1.5

tril.yen

0.5
0.4

15
1.0

10

0.3
0.2

0.5

5

0.1

0.0
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

00.0
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

Domestic business sector (lhs)

OthersSecurities-relatedInternational business sector (lhs)

Trust-related

AgencyInternational business sector ratio (rhs)

Guarantees

Foreign exchange

Deposits and lending

Source: BOJ.

Note: The figures are categorized based on each bank's internal
definition. "Deposits and lending" includes income fromfees and commissions related to the arrangement ofsyndicated loans, commitment lines, securitization, andM&A transactions.
Source: BOJ.

14

5. General and Administrative Expenses
General and administrative expenses at major banks were more or less unchanged, marking adecline of 0.3 percent from the previous year; they decreased in the domestic business sector,
while increasing in the international business sector. At regional banks, general and administrative
expenses decreased by 1.8 percent from the previous year due to a decline in personnel
expenses. While gross operating profits decreased at both major and regional banks, theoverhead cost ratio (= overhead costs / gross operating profits) at major banks continued toincrease due to their overhead costs remaining unchanged, and such ratio at regional banks was
unchanged as their overhead costs decreased.
II-A-13: Decomposition of general and administrative expenses
Major banks
6

Regional banks

y/y % chg.

6y/y % chg.

4

4

2

2

0

0

-2

-2

-4

-4

-6

-6

-8
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-8FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Other expenses
Deposit insurance premiums

Non-personnel expenses (excluding deposit insurance premiums)
Personnel expenses
y/y % chg.

Source: BOJ.

II-A-14: Decomposition of changes in general andadministrative expenses by domestic andinternational business sector at major banks
8

II-A-15: Overhead cost ratios

y/y % chg.

6

75 %

Domestic business sector
International business sector
y/y % chg.

Major banks
Regional banks

70

4

65

2

60
0

55

-2
-4

50

-6
FY 07 08 09 10 11 12 13 14 15 16 17 18

45
FY 10

Source: BOJ.

Note: Overhead cost ratios = overhead costs / grossoperating profits.
Source: BOJ.

15

11

12

13

14

15

16

17

18

B. Realized and Unrealized Gains/Losses on Securities Holdings
1. Realized Gains/Losses on Securities Holdings
With regard to realized gains/losses on bondholdings, the extent to which such losses exceeded
gains expanded at major banks due to further losses from sales of foreign securities, including
loss-cutting sales to enhance the soundness of their portfolios. Realized losses continued to
exceed gains at regional banks, but to a lesser extent.
As for realized gains/losses on stockholdings, the extent to which such gains exceeded losses
turned down at both major banks and regional banks due in part to the stock price decline at theend of 2018, despite the continued reduction in strategic holdings and the sales of ETFs to realize
gains.

II-B-1: Realized gains/losses on bondholdings
Major banks
1.5

Regional banks

tril.yen

0.6

tril.yen

0.4

1.0

0.2
0.0

0.5

-0.2

0.0

-0.4
-0.6

-0.5

-0.8

-1.0

-1.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Losses on redemption of bonds
Losses on sales of bonds
Gains on sales of bonds

Gains on redemption of bonds
Losses on devaluation of bonds
Total

Source: BOJ.

II-B-2: Realized gains/losses on stockholdings
Major banks
2

Regional banks

tril.yen

0.6

tril.yen

0.4

1

0.2

0

0.0
-0.2

-1
-2
-3

-0.4
Losses on sales of stocks
Losses on devaluation of stocks
Gains on sales of stocks
Total

-0.6
-0.8

-1.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-4FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Source: BOJ.

16

2. Unrealized Gains/Losses on Securities Holdings
Looking at unrealized gains/losses on available-for-sale securities holdings as of the end of March
2019, the extent to which unrealized gains exceeded losses remained high both at major andregional banks, but decreased from the end of March 2018 to about 8 trillion yen at major banks
and about 5 trillion yen at regional banks. Looking more closely at the breakdown, the extent towhich unrealized gains in stockholdings exceeded losses, which accounts for a large share of thetotal gains on securities holdings, decreased as the amount outstanding was reduced due to thesales of strategic shareholdings and as stock prices declined. On the other hand, unrealized
gains/losses on holdings of "bonds and other securities" turned positive at major banks and theextent to which unrealized gains exceeded losses increased at regional banks. This is because
unrealized gains/losses on foreign bondholdings turned positive due to a decline in long-term
interest rates.

II-B-3: Unrealized gains/losses on available-for-sale securities holdings
Major banks
Breakdown of bonds and other securities
12

tril.yen10

2.5 tril.yen

Bonds and other securities
Domestic stocks and foreign stocks
Total

2.0

8

1.5

6

1.0

4

0.5

2

0.0

0

-0.5

-2

Other foreign securities
Foreign bonds
Other domestic securities
Domestic corporate bonds
JGBs and municipal bonds
Total

-1.0

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Regional banks
Breakdown of bonds and other securities
7

tril.yen

2.5

6

tril.yen

2.0

5

1.5

4

1.0
3

0.5

2

0.0

1

0

-0.5
Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Note: The breakdown of bonds and other securities at both major and regional banks is shown on the right. "Other domestic
securities" and "other foreign securities" include investment trusts and funds.
Source: BOJ.

17

C. Credit Costs and Non-Performing Loans
1. Credit Costs
Looking at credit costs, major banks recorded smaller reversals of credit costs as there wereloan-loss provisions to domestic and overseas exposures to some large companies, while there
were reversals -- smaller than in the previous year -- of loan-loss provisions to certain large
companies. Credit costs at regional banks increased due to high credit costs incurred by a bankand loan-loss provisions to some large companies.
The credit cost ratio (= credit costs / total loans outstanding) was minus 4 basis points (reversals)
at major banks and 13 basis points at regional banks.

II-C-1: Credit costs and credit cost ratios
Major banks

Regional banks

tril.yenbps

tril.yen

bps

180

6

150

5

150

120

4

120

3

90

3

90

2

60

2

60

1

30

1

30

0

0

0

0

-1
FY02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18-30-1
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

-30

bps

30

0.6

0.4

20

0.4

20

0.2

10
0.2

10

0.0

0

0.0

0

-0.2

-10

-0.4

-20

-0.2

-10

6

Credit costs (H2) (lhs)5

Credit costs (H1) (lhs)

4

0.6

-0.6
FY

Credit cost ratio (rhs)tril.yen

12

13

Write-offs (lhs)

14

15

16

17

Special provisions (lhs)18-30 -0.4
FY

tril.yen

bps

30

-20
12

13

General provisions (lhs)14

15

Others (lhs)

16

17

18

Credit cost ratio (rhs)

Notes: 1. From fiscal 2018, the definition of credit costs has been clarified so that the definition for regional banks has changed
somewhat from fiscal 2017.
2. The lower charts show the breakdown of credit costs at major banks and regional banks, respectively.
Source: BOJ.

18

180

The distribution of credit cost ratios among banks showed that, at major banks, the share of thosewith credit costs reversed decreased from the previous year but remained high, accounting for 60
percent of the total, and there were no banks with credit costs 10 basis points or greater. For
regional banks, the share of those with credit costs reversed decreased to 10 percent of the total,
and the share of banks with credit costs 10 basis points or greater, which had continued todecrease, turned up.
II-C-2: Credit cost ratio distribution
Major banks
100

Regional banks

%

100

90

90

80

80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0
FY

12

13

14

0
FY

15
16
17
20bps and over18
10-20bps

minus 10-0bps

minus 20-10bps

Note: Proportion of the number of banks by credit cost ratio.
Source: BOJ.

19

%

12
13
0-10bps

14

15

under minus 20bps Reversals

16

17

18

2. Non-Performing Loans
The non-performing loan (NPL) ratio at major banks continued to follow a moderate declining trend,
and reached its lowest level since fiscal 2001, when the relevant data were first recorded.
Meanwhile, the NPL ratios for overseas loans at the three major banks remained at low levels. The
NPL ratio at regional banks remained low, but turned up slightly due to the deterioration ofbusiness conditions at some large companies.
Looking at the proportion of loans outstanding by borrower classification, the ratio of normal loans
at both major banks and regional banks remained high, exceeding 95 percent at major banks andmarking almost 90 percent at regional banks, although the ratio at regional banks turned downslightly.
II-C-3: Non-performing loans outstanding and non-performing loan ratios
30

tril.yen

Major banks%

Special attention (lhs)

10

Doubtful (lhs)25Bankrupt or de facto bankrupt (lhs)2030

tril.yen

Regional banks

%

25

8

10
8

20

Non-performing loan ratio (rhs)

6

6

15

15

4

4

10

10
2

5

2

5

0
0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: BOJ.

00
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

II-C-4: Non-performing overseas loan ratios (three major banks)
3 %Overseas
Asia
Others (excluding Asia)
Domestic2

1

0
Source: Published accounts of each bank.
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18

II-C-5: Proportion of loans outstanding by borrower classification
Major banks
100

%

100

95

95

90

90

85
80

%

Regional banks

85"In danger of bankruptcy" and below
Special attention
Need attention
Normal80

75

75

FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18

FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: The data are calculated on a write-off basis.
Source: BOJ.

20

3. Loan-Loss Provisions(1) Loan-Loss Provision Ratios
The average loan-loss provision ratio for all exposures at major banks decreased from theprevious year due to a somewhat large decline in the loan-loss provision ratio for loans requiring"special attention." Such ratio at regional banks turned up due to a rise in loan-loss provision ratios
for normal loans and loans requiring "special attention."

II-C-6: Loan-loss provision ratios
All exposures
1.8

Normal and need attention

%

0.3 %

%

10

50

%

Special attention and indanger of bankruptcy

1.6

8

1.4

40

0.2

1.2

6

1.0

30

0.8

4

0.6

0.1
20

0.4

2

0.2
0.0
FY 05

0.0
FY 05

0

10
FY 05

Major banks

Normal (major banks) (lhs)

18
10
15
Special attention (major banks)

Regional banks

Normal (regional banks) (lhs)

Special attention (regional banks)

Need attention (major banks) (rhs)

In danger of bankruptcy (major banks)

Need attention (regional banks) (rhs)

In danger of bankruptcy (regional banks)

10

15

18

10

15

18

Notes: 1. The data include loans to which the discounted cash flow method is applied.
2. The loan-loss provision ratio is calculated as loan-loss provisions divided by the total amount of claims (not the uncoveredamount of claims).
Source: BOJ.

21

(2) Outstanding Amount of Loan-Loss Provisions
Looking at the outstanding amount of loan-loss provisions, general provisions continued to decline,
while special provisions turned up at major banks due to a downgrading of the borrowerclassification for uncovered domestic exposures to some large companies. Both generalprovisions and special provisions turned up at regional banks.

II-C-7: Decomposition of outstanding amount of general loan-loss provisions
Regional banks

Major banks
0.3

tril.yen

0.3

tril.yenInteraction variable
Loan-loss provision ratio factor
Amount outstanding factor
Total

0.2

0.2

0.1

0.1

0.0

0.0

-0.1

-0.1

-0.2

-0.2

-0.3

-0.3

-0.4
FY 06 07 08 09 10 11 12 13 14 15 16 17 18-0.4
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: Each factor represents the sum of the amount calculated by borrower classification.
Source: BOJ.

II-C-8: Decomposition of outstanding amount of special loan-loss provisions
Major banks
0.5
0.4
0.3
0.2

tril.yen

Regional banks
0.5Interaction variable
Loan-loss provision ratio factor
Uncovered loan ratio factor
Amount outstanding factor
Total

tril.yen

0.4
0.3

0.2

0.1

0.1

0.0

0.0

-0.1

-0.1

-0.2
-0.3

-0.2

-0.4
FY 06 07 08 09 10 11 12 13 14 15 16 17 18-0.3
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: Each factor represents the sum of the amount calculated by borrower classification.
Source: BOJ.

22

D. Capital Adequacy Ratios
On a consolidated basis, both the common equity Tier 1 capital ratio (CET1 capital ratio) and thecapital adequacy ratio of internationally active banks remained high, but turned down as (1) theamount of capital decreased, due to both a pause in the accumulation of retained earnings caused
by lower profits and a decline in unrealized gains on available-for-sale securities holdings, which
are included in CET1 capital, while (2) risk-weighted assets increased.
At domestic banks, the capital adequacy ratio continued to decline as (1) the amount of capitaldecreased, with the arrangements for these banks to phase in the Basel III requirements
continuing to be gradually removed (the proportion of instruments that can be included in capital
was reduced), and due in part to continued payouts to shareholders despite declining profits (seeBox 2 for details), while (2) risk-weighted assets increased.
II-D-1: Capital adequacy ratios
Domestic banks

Internationally active banks
18

%

18

16

16

14

14

12

12

10

10

8

8

6

6

4
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18%

4FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Capital adequacy ratio

Capital adequacy ratio
Tier 1 capital ratio

Tier 1 capital ratio

CET1 capital ratioCore capital ratio

Source: BOJ.

II-D-2: Capital components and risk-weighted assets
Internationally active banks

Domestic banks
tril.yen 350

70 tril.yen

35 tril.yen

tril.yen

175

60

300

30

150

50

250

25

125

40

200

20

100

30

150

15

75

20

100

10

50

10

50

5

25

0

0

0

0

-50

-5
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

-25

-10
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Tier 1 capital (lhs)
Tier 2 capital (others) (lhs)
CET1 capital (lhs)
Tier 2 capital (lhs)
Capital (lhs)

Tier 2 capital (subordinated debts) (lhs)
Deductions and regulatory adjustment (lhs)
Other Tier 1 capital (lhs)
Core capital (lhs)
Risk-weighted assets (rhs)Note: Since fiscal 2013, the numerator of the capital adequacy ratio at domestic banks has been referred to as "core capital"
in order to distinguish the definition of "capital" in the current Financial Services Agency public notice from that in theformer public notice (the same applies to Chart III-D-2).
Source: BOJ.

23

Box 1: Income structures of major financial groups
The income structures of major financial groups have changed over approximately the past 10
years. Among the three major financial groups, banks (the sum of commercial banks and trustbanks) -- which form the core of financial groups -- on a non-consolidated basis have seen
increases in net non-interest income in the domestic business sector and income in theinternational business sector, while net interest income in the domestic business sector has
continued to follow a declining trend. Furthermore, group companies' profits have increased andcontributed to raising the profit levels of individual financial groups as a whole.
Looking at group companies' contribution to consolidated profits for fiscal 2018 by type of groupcompany, PPNR (excluding trading income), which shows core profitability, was pushed up by
nonbanks and overseas subsidiaries and affiliates.
Although these types of companies have continuously been incurring certain credit costs andsome nonbanks incurred one-time losses in fiscal 2018, net income was also pushed up bygroup companies' profits.
B1-1: Gross operating profits from core business of the three major financial groups
10

Difference b/w consolidated and non-consolidated profits(group companies)
Non-consolidated profits in international business sector(banks)Non-consolidated domestic net non-interest income(banks)Non-consolidated domestic net interest income(banks)tril.yen

8
6

Notes: 1. Gross operating profits from core business = grossoperating profits - realized gains/losses onbondholdings.
2
2. Banks' data (on a non-consolidated basis) are thesum of commercial banks and trust banks. The
0same applies to the charts below.
FY 06 07 08 09 10 11 12 13 14 15 16 17 18
Sources: Published accounts of each financial group; BOJ.

4

B1-2: Breakdown of difference between consolidated and non-consolidated data
for the three major financial groups in fiscal 2018
PPNR (excluding trading income)3.5

tril.yen

Credit costs

Net income

0.2 tril.yen

2.0 tril.yen

0.1

1.5

0.0

1.0

-0.1

0.5

More reversals

3.0
2.5
2.0
1.5
1.0
0.5

Higher costs

Sources: Published accounts of each financial group; BOJ.

24

Consolidated income

Other

Overseas subsidiaries
and affiliates

Nonbanks

Securities companies

Consolidated costs

Other

Overseas subsidiaries
and affiliates

Nonbanks

Securities companies

0.0

Non-consolidated
costs

Consolidated revenue

Other

Nonbanks

Overseas subsidiaries
and affiliates

Securities companies

Non-consolidated
revenue-0.2

Non-consolidated
income0.0

Box 2: Payouts to shareholders by regional banks
A large number of regional banks prioritize stable dividend payouts despite a decline in theirprofitability and some regional banks buyback their shares.
As a result, both dividend payout ratios and total payout ratios among regional banks have been
trending upward and their distributions have been skewed upward. This trend is likely to largely
continue in fiscal 2019.

B2-1: Net income and payouts to shareholders of regional banks
1.4

tril.yen

Share buybacks
Dividends
Net income

1.2

Forecast

1.0
0.8
0.6
0.4
0.2

0.0
FY 15

16

17

18

19

Notes: 1. The data are on a consolidated basis of banks or holding companies.
2. The data for the fiscal 2019 forecast are published by each bank and holding company, excluding the data for sharebuybacks.
3. The data for share buybacks include those for the repayment of public funds.
Source: BOJ.

B2-3: Total payout ratios of regional banks

B2-2: Dividend payout ratios of regional banks
70

%

60

70 %

Forecast

10th-90th percentile range
25th-75th percentile range
Median

60

50

50

40

40

30

30

20

20

10

10

0
FY15

16

17

18

0
FY 15

19

10th-90th percentile range
25th-75th percentile range
Median16

17

18

Note: Total payout ratio = (dividends + share buybacks) / net
income.
Source: BOJ.

Notes: 1. Dividend payout ratio = dividends / net income.
2. The data for the fiscal 2019 forecast are publishedby each bank and holding company.
Source: BOJ.

25

III. Financial Results of Japan's Shinkin Banks for Fiscal 2018
This chapter analyzes shinkin banks' core profitability (net interest income, net non-interest
income, and general and administrative expenses), realized and unrealized gains/losses on
securities holdings, credit costs and non-performing loans, as well as capital adequacy ratios.

A. Core Profitability
1. Net Interest Income
Net interest income continued to decrease as the impact of narrowing interest rate spreads onloans was larger than that of an increase in loans outstanding.

III-A-2: Decomposition of net interest income(change from a year earlier)

III-A-1: Net interest income

2.5
2.0

tril.yen

Loan-related
Securities-related
Others
Net interest income

0.10

y/y chg., tril.yen

0.05

1.5
0.00

1.0
-0.05

0.5
0.0
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Notes: 1. "Others" includes interest income on deposits at the
Shinkin Central Bank and at the Bank of Japan.
2. Loan-related = (average loans outstanding) *(interest rate spreads on loans). Securities-related= (average outstanding securities holdings) *(interest rate spreads on securities).
Source: BOJ.

-0.10
FY 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Interest margin on deposit factor
Deposits outstanding factor
Interest rate spreads on securities factor
Securities holdings factor
Interest margin on loans factor
Loans outstanding factor
Others
Net interest income (y/y chg.)

26

Source: BOJ.

2. Interest Rate Spreads on Loans and Loans Outstanding(1) Interest Rate Spreads on Loans
Interest rate spreads on loans continued to narrow due to a decline in lending rates. The
distribution of interest rate spreads for individual shinkin banks also continued to shrink on thewhole.
III-A-3: Interest rate spreads on loans
3.0

III-A-4: Distribution of interest rate spreads on loans

%

120

2.5

Number of
banks
FY18
FY17

100

FY16

2.0

80

FY15

1.5

FY14

60

1.0

40

0.5

0.0

20

-0.5

0

FY 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Interest rate on loans

less1.752.252.753.25than 1.502.002.503.003.50- %1.50

Funding cost rate
Interest rate spreads on loans
Note: In calculating the interest rate spreads, interest
expenses on interest rate swaps are deductedfrom funding costs.
Source: BOJ.

Note: In calculating the interest rate spreads, interest expenses
on interest rate swaps are deducted from funding costs.
Source: BOJ.

(2) Loans Outstanding by Lending Rate
Looking at developments in loans outstanding, those with low lending rates continued to increase.
III-A-5: Changes in loans outstanding by lending
rate (from the end of March 2015 to theend of March 2019)6

III-A-6: Changes in proportion of loans
outstanding by lending rate (from the endof March 2015 to the end of March 2019)

tril.yen

18

5

16

4

14

3

12

2

10

1

8

0

6

-1

4

-2

2

-3

%

0

less
0.50- 1.00- 1.50- 2.00- 2.50- 3.00than 0.25- 0.75- 1.25- 1.75- 2.25- 2.75%
0.25
End of March 2018 → End of March 2019
End of March 2017 → End of March 2018
End of March 2016 → End of March 2017
End of March 2015 → End of March 2016
End of March 2015 → End of March 2019 total

less0.50- 1.00- 1.50- 2.00- 2.50- 3.00than 0.25- 0.75- 1.25- 1.75- 2.25- 2.75%
0.25
End of March 2019
End of March 2018
End of March 2017
End of March 2016
End of March 2015

Source: BOJ.

Source: BOJ.

27

3. Interest Rate Spreads on Securities
Interest rate spreads on securities were more or less unchanged on the whole.
III-A-8: Amounts outstanding and duration of
securities by product type

III-A-7: Interest rate spreads on securities

2.0

%

45

1.5
1.0
0.5
0.0

tril.yen

9

40

8

35

7

30

6

25

5

20

4

15

3

10

2

5

1

0
0
FY 13
14
15
16
17
18
Investment trusts, etc. (lhs)
Stocks (lhs)
Foreign securities (lhs)
Other domestic bonds (lhs)
Municipal, government-guaranteed, and public and corporate bonds (lhs)
JGBs (lhs)
Domestic bonds duration (rhs)
Source: BOJ.

-0.5
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Interest rate on securities
Funding cost rate
Interest rate spreads on securities
Interest rate spreads on securities(excluding profits and losses from investment trusts
due to cancellations)
Note: In calculating the interest rate spreads, interest
expenses on interest rate swaps are deducted fromfunding costs.
Source: BOJ.

4. Net Non-Interest Income
Net non-interest income decreased due to weakness in sales of investment trusts.
III-A-9: Net non-interest income
0.15

year

tril.yen
OthersNet fees and commissions

0.10

0.05

0.00

-0.05
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: BOJ.

28

5. General and Administrative Expenses
General and administrative expenses decreased, particularly with respect to personnel expenses.

III-A-10: Decomposition of general and administrative expenses
2

y/y % chg.

1
0
-1
-2

-3
-4
-5
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Other expenses
Deposit insurance premiums
Non-personnel expenses (excluding deposit insurance premiums)
Personnel expenses
y/y % chg.

Source: BOJ.

B. Realized and Unrealized Gains/Losses on Securities Holdings
1. Realized Gains/Losses on Securities Holdings
Looking at realized gains/losses on bondholdings, the extent to which gains exceeded losses wasaround the same as the previous year. On the other hand, for those on stockholdings, the extent towhich gains exceeded losses was less than in the previous year.

III-B-1: Realized gains/losses on bondholdings

0.2

III-B-2: Realized gains/losses on stockholdings

tril.yen

0.2

0.1

0.1

0.0

0.0

-0.1
-0.2

Losses on redemption
Gains on redemption
Losses on sales
Losses on devaluation
Gains on sales
Total

-0.3
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

tril.yen

-0.1

-0.2

-0.3
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: BOJ.

Source: BOJ.

29

Losses on sales
Losses on devaluation
Gains on sales
Total

2. Unrealized Gains/Losses on Securities Holdings
Looking at unrealized gains/losses on available-for-sale securities holdings as of the end of March
2019 for bondholdings, which accounted for a large share of the total gains on securities holdings,
the extent to which gains exceeded losses expanded due to a decline in domestic and overseasinterest rates.
III-B-3: Unrealized gains/losses on available-for-sale securities holdings
Breakdown of bonds and other securities
1.6

tril.yen

1.6

1.4

1.4

1.2

1.2

1.0

1.0

0.8

0.8

0.6

0.6

0.4

0.4

0.2

0.2

0.0

0.0

-0.2

tril.yen-0.2
Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Bonds and other securities
Domestic stocks and foreign stocks
Total

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Other foreign securities
Foreign bonds
Other domestic securities
Domestic corporate bonds
JGBs and municipal bonds
Total
Note: "Other domestic securities" and "other foreign securities" include investment trusts and funds.
Source: BOJ.

C. Credit Costs and Non-Performing Loans
1. Credit Costs
Credit costs increased for the first time in seven years as general loan-loss provisions turned
positive following the reversals until the previous year. Looking at the distribution of credit cost
ratios among shinkin banks, the share of banks with credit costs reversed decreased somewhat,
and the share of banks with credit costs 10 basis points or greater increased.
III-C-1: Credit costs and credit cost ratio
1.0

tril.yenbps

100 0.4

tril.yen

III-C-2: Distribution of credit cost ratiosbps

40 100
90

0.8

80

0.3

30 80
70

0.6

60

0.2

20 60
50

0.4

40

0.1

10 40
30

0.2

20

0.0

0

%

20
10

0.0
0
FY 02 04 06 08 10 12 14 16 18
Others (lhs)
Special provisions (lhs)
Credit cost ratio (rhs)

Source: BOJ.

-0.1
-10 0
FY 12 13 14 15 16 17 18
FY 12 14 16 18
20bps and over
10-20bps
0-10bps
General provisions (lhs)minus 10-0bps
minus 20-10bps under minus 20bps
Write-offs (lhs)
Total credit costs (lhs)
Reversals
Note: Proportion of number of banks by credit cost ratio.
Source: BOJ.
30

2. Non-Performing Loans
The NPL ratio continued to decline moderately and reached its lowest level since fiscal 2001,
when the relevant data were first recorded. The proportion of loans outstanding for normal loans
remained large.
III-C-4: Proportion of loans outstanding byborrower classification

III-C-3: Non-performing loans outstanding andnon-performing loan ratios
tril.yen8% 12Special attention (lhs)
Doubtful (lhs)
Bankrupt or de facto bankrupt (lhs) 10
Non-performing loan ratio (rhs)
8

6

6

4

4

2

2

12
10

100

%

95
90
85
80

75
70

65
FY 05 06 07 08 09 10 11 12 13 14 15 16 17 18"In danger of bankruptcy" and below（年度末）Special attention
Need attention
NormalNote: The data are calculated on a write-off basis.
Source: BOJ.

00
FY 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: BOJ.

3. Loan-Loss Provisions(1) Loan-Loss Provision Ratios
The average loan-loss provision ratio for all exposures continued to decline.
Looking at loan-loss provisions by borrower classification, the loan-loss provision ratio for normalloans continued to increase and the ratio for loans requiring "special attention," which had
continued to decline, turned up.
III-C-5: Loan-loss provision ratios
All exposures
2.5
2.0

%

Special attention andin danger of bankruptcy

Normal and need attention
0.20

%

%

1.5

25

%

20

0.15
1.0

1.5

15
0.10

1.0

10
0.5

0.5

0.05

Normal (lhs)5Special attention

In danger of bankruptcy
Need attention (rhs)
0.0
0
0.00
0.0
FY 05
10
15
FY 05
18
18
10
15
10
15
18
FY 05
Notes: 1. The data include loans to which the discounted cash flow method is applied.
2. The loan-loss provision ratio is calculated as loan-loss provisions divided by the total amount of claims (not theuncovered amount of claims).
Source: BOJ.

31

(2) Outstanding Amount of Loan-Loss Provisions
As for the outstanding amount of loan-loss provisions, general provisions turned up due to anincrease in the outstanding amount of "need attention" loans and a rise in the loan-loss provision
ratio for normal loans. Special provisions continued to decrease mainly due to the decline in theoutstanding amount of loans requiring special provisions.
III-C-6: Decomposition of the outstanding amountof general loan-loss provisions
0.06

tril.yen

III-C-7: Decomposition of the outstanding
amount of special loan-loss provisions
tril.yen
0.06

Amount outstanding factor
Loan-loss provision ratio factor
Interaction variable
Total

0.04
0.02

0.04

Amount outstanding factor
Uncovered loan ratio factor
Loan-loss provision ratio factor
Interaction variable
Total

0.02

0.00

0.00

-0.02

-0.02

-0.04

-0.04

-0.06

-0.06

-0.08
FY 06 07 08 09 10 11 12 13 14 15 16 17 18
Note: Each factor represents the sum of the amountcalculated by borrower classification.
Source: BOJ.

-0.08
FY 06 07 08 09 10 11 12 13 14 15 16 17 18

Note: Each factor represents the sum of the amountcalculated by borrower classification.
Source: BOJ.

D. Capital Adequacy Ratios
The capital adequacy ratio decreased slightly. The amount of capital increased, mainly due to theaccumulation of retained earnings, but this was outpaced by an increase in risk-weighted assets.
III-D-1: Capital adequacy ratios
14

III-D-2: Capital components and risk-weighted assets

%

14

70
60

10

50

8

40

6

30

4

20

Tier 1 capital ratio

2

10Core capital ratio

0

0

-2
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Core capital (lhs)
Deductions and regulatory adjustment (lhs)
Tier 2 capital (others)(lhs)
Tier 2 capital (subordinated debts) (lhs)
Tier 1 capital (lhs)
Capital (lhs)
Risk-weighted assets (rhs)

-10

10
8
Capital adequacy ratio

4
FY 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Source: BOJ.

tril.yen

12

12

6

tril.yen（年

Source: BOJ.

32

Reference: Developments in Financial Markets▽

25,000

Nikkei 225 Stock Average and foreign exchange
rates
yen

yen

Nikkei 225 Stock Average(lhs)
U.S. dollar/yen(rhs)▽120

24,0000.2

JGB yields, etc.
%

0.1

115

23,0000.0

22,000110 -0.1

21,000-0.2

20,000105

18,000
17/1
Jan.

17/7
July

2017

▽

10-year JGB yield
2-year JGB yield
TIBOR(3-month)-0.3

19,000

18/1
Jan.
2018

18/7
July

19/1
Jan.
2019

100 -0.4
17/1
Jan.
2017

U.S. treasury yields, etc.

▽

17/7
July

18/1
Jan.
2018

18/7
July

19/1
Jan.
2019

U.S. dollar funding premiums
%

%
3.5

-1.0

3.0

5Y
1Y
3M

-0.8

2.5

-0.6
2.0

-0.4
1.5

-0.2

1.0

10-year UST yield
2-year UST yield
Federal funds rate

0.5
0.0
17/1
Jan.
2017

17/7
July

18/1
Jan.
2018

18/7
July

0.0
0.2
17/1
Jan.
2017

19/1
Jan.
2019

17/7
July

18/1
Jan.
2018

18/7
July

19/1
Jan.
2019

Notes: 1. Latest data as at end-March 2019. U.S. dollar funding premiums indicate the additional interest costs on U.S. dollar
LIBOR in financing U.S. dollar funds collateralized by yen funds. 3M dollar funding premiums, which are expressedin opposite signs, show U.S. dollar funding costs on U.S. dollar LIBOR spreads through currency and foreignexchange swaps. Both 1Y and 5Y dollar funding premiums are U.S. dollar/yen cross-currency basis swaps.
2. The lightly shaded areas show the data in fiscal 2017. The darker shaded areas show the data in fiscal 2018.
Source: Bloomberg.

33

GlossaryFinancial statements of financial institutions
Net income = operating profits from core business + realized gains/losses on stockholdings +realized gains/losses on bondholdings – credit costs ± others (such as extraordinary
gains/losses)
Operating profits from core business = pre-provision net revenue (PPNR) (excluding trading
income) = net interest income + net non-interest income – general and administrative
expenses
Net interest income = interest income – interest expenses
Net non-interest income = net fees and commissions + profits on specified transactions+ other operating profits – realized gains/losses on bondholdings
Realized gains/losses on stockholdings = gains on sales of stocks – losses on sales of stocks– losses on devaluation of stocks
Realized gains/losses on bondholdings = gains on sales of bonds + gains on redemption of bonds– losses on sales of bonds – losses on redemption of bonds – losses on devaluation of bonds
Credit costs = loan-loss provisions + write-offs + losses on credit sales – recoveries of write-offs
Credit cost ratio = credit costs / total loans outstanding

Capital adequacy ratios of internationally active banks
Common equity Tier 1 (CET1) capital ratio = CET1 capital / risky assets
CET1 capital comprises common equities and retained earnings.
Risky assets are financial institutions' risk-weighted assets.

Tier 1 capital ratio = Tier 1 capital / risky assets
Tier 1 capital includes CET1 capital and equities such as preferred equities that meet certain conditions.

Total capital adequacy ratio = Total capital / risky assets
Total capital includes Tier 1 capital and subordinated bonds that meet certain conditions.

Capital adequacy ratios of domestic banks
Core capital ratio = core capital / risky assets
Core capital includes common equities and retained earnings as well as equities such as preferred equities
that meet certain conditions.
Risky assets are financial institutions' risk-weighted assets.

34