*

Japan's megabanks raise profit forecasts again to new

records

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Domestic interest rate hikes feed into higher lending

margins

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Corporate activity strong as tariff uncertainty eases

(Recasts with MUFG results throughout, adds details from

earnings)

By Anton Bridge

TOKYO, Nov 14 (Reuters) - Japan's largest banks raised

their annual profit forecasts and share buyback programmes after

second quarter earnings as they cashed in on a long-awaited rise

in interest rates and a wave of corporate activity fuelled by

the end of deflation.

Mizuho Financial Group ( MFG ) on Friday posted a 44% rise

in net profit for July-September and raised its profit forecast

to 1.13 trillion yen ($7.5 billion) from 1.02 trillion yen for

the financial year to March 2026.

Larger rival Mitsubishi UFJ Financial Group ( MUFG ) logged

a 7% increase in net profit over the period and hiked its annual

forecast to 2.1 trillion yen from 2 trillion yen.

CORPORATE ACTIVITY CONTINUES

The results also demonstrated the banks' success in

weathering uncertain global economic conditions following U.S.

President Donald Trump's announcement of wide-ranging import

tariffs in April.

As tariff-induced uncertainty waned, large Japanese firms,

which make up the bulk of the banks' corporate clients,

continued mergers, acquisitions and capital spending, supporting

loan demand.

MUFG's loan balance for large domestic corporations rose to

26.8 trillion yen at the end of September from 25.6 trillion a

year earlier.

Japan's return to positive interest rates has also begun to

feed into the banks' profits.

Mizuho's domestic loan and deposit rate margin over the six

months to the end of September rose to 1.07% from 0.92% in the

2024 financial year and 0.76% in the year before that.

"There's still a lot of uncertainty concerning tariffs. If

for instance 15% tariffs are imposed on cars, the components and

materials may be subject to different tariffs," Mizuho Chief

Executive Masahiro Kihara told a press briefing.

"But corporate actions have steadily returned," Kihara said.

MUFG announced a 250 billion yen share buyback, bringing its

total for this financial year to a record 500 billion yen, while

Mizuho announced one of 200 billion yen, bringing its annual

total to 300 billion yen.

During years of rock-bottom interest rates, Japan's banks

looked to expand beyond domestic lending, such as

internationally or in areas such as wealth management.

MUFG owns about 24% of Morgan Stanley ( MS ), which makes up

over a quarter of its net income, while non-interest income in

Mizuho's global corporate and investment banking unit grew

nearly 20% year-on-year in the six months to end-September.

"Since the negative interest rates period we have massively

increased our revenue streams, including abroad," Kihara said.

Both Mizuho and MUFG reported record profits in the year

ended March 2025 and Friday's forecasts exceed previous

estimates, which themselves prefigured records.

MUFG, Japan's largest lender, reported quarterly profit of

747 billion yen, while number three player Mizuho booked 399

billion yen.

Mitsui Sumitomo Financial Group, Japan's

second-largest banking group, also reports earnings on Friday.

($1 = 150.7800 yen)