Japan megabanks post strong Q1 as MUFG capital buffer thins

MUFG's Shriram Finance deal likely weighed on capital.

Japan’s megabanks all registered strong growth in domestic net interest income, diversified and good increases in fee income, and inside-guidance credit costs in the Q1 2026 period, according to CreditSights by Fitch Solutions.

Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group both reported “comfortable” common equity tier 1 (CET1) ratio buffers during the quarter ending 30 June, CreditSights said.

On the other hand, CreditSights noted MUFG’s CET1 ratio buffer falling to just 50 basis points (bp) at FY2025 from 180bp in H1 FY2025, which it said was in part as a result of its acquisition of 20% of Shriram Finance.

“[Whilst] we expect MUFG to rebuild its capital ratios due to its strong profitability, it does raise questions about capital management at the group,” CreditSights said.

MUFG’s headline CET1 ratio increased by 50bp to 12.96% in Q1 2026.

CreditSights said it maintains its outperform recommendation on Mizuho and MUFG and move SMFG to an outperform recommendation.

Japan’s 50 banks saw stable loan demand in the second quarter of 2026, according to a separate survey by the Bank of Japan (BOJ).

The three megabanks announced earlier this year that they plan to conduct commercial transactions using a stablecoin in FY2026.