Mizuho looking at dividend hike and share buyback

But only if profit permits.

Cash flush Mizuho Financial Group, Inc, Japan’s second-largest lender by assets, will consider buying back its shares from the market or raising its dividend in coming months if profit growth remains on target in the second half to next March.

Mizuho, however, has the lowest capital adequacy ratio of the country’s three megabanks. Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, the No. 1 and No. 3 banks, raised their dividends in the financial year ended in March. Both have cleared new Basel III global bank-capital requirements.

Mizuho’s capital adequacy ratio was 8.29% at the end of March on a fully implemented basis, versus MUFG at 11.1% and SMFG at 8.6%. Under Basel III, banks must have Common Equity Tier I capital of at least 7% of risk-weighted assets by 2019.

Japanese banks have maintained relatively sound balance sheets compared with many of their overseas rivals, especially those in Europe. They have also earned massive profits from Japanese government bond trading.

Analysts said what to do with excess capital is becoming a more important question than whether Japanese banks can clear Basel III or not. Options available include a dividend increase, share buybacks, share cancellations and strategic acquisitions.