Japan’s megabanks post record profits, but analysts warn growth may slow as risks mount

The yen gained on Wednesday following a rally in Japan's equities and bets on more fiscally responsible policies after Prime Minister Takaichi's election win. Yevgen Romanenko | Moment | Japan's largest banks posted record annual profits in their latest financial results, but earnings growth could slow as credit costs rise and geopolitical risks cloud the outlook, analysts say. Mitsubishi UFJ Financial Group , the country's largest lender, said net profit rose 30% from a year ago to 2.4 trillion yen for the fiscal year ended March 2026, a record high for the third consecutive year. Similarly, Sumitomo Mitsui Financial Group and Mizuho Financial Group also reported record annual profits in their latest earnings, rising 34% and 41% from a year ago, respectively. "Higher yen rates are improving lending margins and supporting net interest income, while healthy corporate funding demand and stronger fee income are adding to revenue," said Kaori Nishizawa, Director of Banks at Fitch Ratings. Nomura reiterated its bullish stance on Japan's major banks and named Sumitomo Mitsui and Mizuho as its top picks. The three megabanks — Mitsubishi UFJ, Sumitomo Mitsui and Mizuho — still "look undervalued relative to the strength of their earnings," Nomura said. However, analysts said the lenders could struggle to keep profits at record levels. …