Mizuho Financial Group Earnings: Guidance Hike Remains Modest, Given Risks of Yen Strengthening

We maintain our JPY 2,490 fair value estimate for no-moat Mizuho Financial Group; this is almost equal to the current share price and represents 0.66 times book value as of September. It is lower than the range of 0.8-0.9 times book where we estimate fair value for the other Japanese megabanks, reflecting Mizuho’s less ample capital cushion that limits its ability to conduct share buybacks. Mizuho’s plan to pay a JPY 100 dividend this fiscal year—raised Nov. 13 from its previous guidance of JPY 95 dividend—represents a 4.0% yield, higher than the fair dividend yields of 3.2% that we assign to Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Sumitomo Mitsui Trust. The difference is that we forecast the other banks will conduct annual share buybacks of around 1% of shares outstanding.