Japan's Big Three Banks Set New Profit Records as BOJ Rate Hikes Bite

Japan's three largest banking groups, Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group, recorded a combined net income of approximately ¥5.26 trillion (US$32 billion) in the financial year ended March 2026, up around 34 percent from the previous year.

The Bank of Japan's (BOJ) policy rate hike to 1 percent is expected to continue driving record profitability for Japanese banks. MUFG saw a 30 percent increase in net income to ¥2.43 trillion, while SMFG and Mizuho reported net income growth of 34 percent and 41 percent, respectively.

The most significant benefit has been in net interest income, with rising rates improving the loan-to-deposit spread and increasing the difference between asset yields and funding costs. Sumitomo Mitsui's domestic results demonstrate this mechanism in action, with its average yield on loans and discounted bills increasing by 32 basis points to 1.34 percent.

Regional lenders are also benefiting from the improved operating environment, with the BOJ reporting that pre-provision net revenue has continued to rise among major, regional, and shinkin banks. Banks' net income has increased due to expanding corporate loan books, stronger investment banking and wealth-management fees, capital-markets activity, and overseas operations.