Loans | 4. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2019 and 2020: 2019 2020 (in millions of yen) Domestic: Manufacturing 9,553,854 9,731,028 Construction and real estate 8,950,577 9,603,433 Services 5,016,971 5,992,511 Wholesale and retail 5,159,356 5,219,727 Transportation and communications 3,693,491 3,832,884 Banks and other financial institutions 4,345,589 4,634,442 Government and public institutions 2,358,904 2,198,805 Other industries (Note) 5,472,597 5,389,347 Individuals: Mortgage loans 8,950,216 8,567,099 Other 907,589 861,235 Total domestic 54,409,144 56,030,511 Foreign: Commercial and industrial 19,126,182 20,818,709 Banks and other financial institutions 9,086,721 10,475,277 Government and public institutions 296,872 317,284 Other 33,171 35,388 Total foreign 28,542,946 31,646,658 Total 82,952,090 87,677,169 Less: Unearned income and deferred loan fees—net 152,147 149,081 Total loans before allowance for loan losses 82,799,943 87,528,088 Note: Other industries of d Net losses on sales of loans were ¥87 million, ¥2,018 million and ¥1,036 Credit quality information In accordance with the MHFG Group’s credit risk management policies, the Group uses an internal rating system that consists of credit ratings for the corporate portfolio segment and pool allocations for the retail portfolio segment as the basis of its risk management infrastructure. Credit ratings consist of obligor ratings which represent the level of credit risk of the obligor, and transaction ratings which represent the ultimate possibility of incurring losses on individual loans by taking into consideration various factors such as collateral or guarantees involved. In principle, obligor ratings are applied to all obligors except those to which pool allocations are applied, and are subject to regular review at least once a year as well as special review which is required whenever the obligor’s credit standing changes. Pool allocations are applied to small loans that are less than a specified amount by pooling customers and loans with similar risk characteristics, and the risk is assessed mainly based on past due status and managed according to such pools. The Group generally reviews the appropriateness and effectiveness of the approach to obligor ratings and pool allocations once a year in accordance with predetermined policies and procedures. The table below presents the MHFG Group’s definition of obligor ratings used by MHBK and MHTB: Obligor category (1)(2) Obligor rating (3) Definition Normal A Obligors whose certainty of debt fulfillment is very high, hence their level of credit risk is very low. B Obligors whose certainty of debt fulfillment poses no problems for the foreseeable future, and their level of credit risk is low. C Obligors whose certainty of debt fulfillment and their level of credit risk pose no problems for the foreseeable future. D Obligors whose current certainty of debt fulfillment poses no problems, however, their resistance to future economic environmental changes is low. Watch E1 Obligors that require observation going forward because of either minor concerns regarding their financial position, or their somewhat weak or unstable business conditions. E2 Obligors that require special observation going forward because of problems with their borrowings such as reduced or suspended interest payments, problems with debt fulfillment such as failure to make principal or interest payments, or problems with their financial position as a result of their weak or unstable business conditions. Intensive control F Obligors that are not yet bankrupt but are in financial difficulties and are deemed likely to become bankrupt in the future because of insufficient progress in implementing their management improvement plans or other measures (including obligors that are receiving ongoing support from financial institutions). Substantially bankrupt G Obligors that have not yet become legally or formally bankrupt but are substantially insolvent because they are in serious financial difficulties and are deemed to be incapable of being restructured. Bankrupt H Obligors that have become legally or formally bankrupt. Notes: (1) Special attention obligors are watch obligors with debt in TDR or 90 days or more delinquent debt. Loans to such obligors are considered impaired. (2) The Group classifies loans to special attention, intensive control, substantially bankrupt and bankrupt obligors as impaired loans. (3) Equivalent obligor ratings are determined for the other portfolio segment. The table below presents credit quality information of loans based on the MHFG Group’s internal rating system at March 31, 2019 and 2020: Normal obligors Watch obligors excluding special attention obligors (1) Impaired loans Total Corporate Retail (2) Other (3) Corporate Retail (2) Other (3) (in millions of yen) 2019 Domestic: Manufacturing 9,205,542 69,080 19,805 141,202 8,278 1,303 108,644 9,553,854 Construction and real estate 8,182,062 505,142 15,920 186,753 14,490 25 46,185 8,950,577 Services 4,665,709 165,643 3,281 90,178 18,586 1 73,573 5,016,971 Wholesale and retail 4,682,630 161,392 26,881 127,695 25,553 591 134,614 5,159,356 Transportation and communications 3,543,952 71,934 934 37,993 7,472 — 31,206 3,693,491 Banks and other financial institutions 4,304,483 1,534 72 28,881 319 — 10,300 4,345,589 Government and public institutions 2,358,899 5 — — — — — 2,358,904 Other industries (4) 3,126,217 2,450 2,323,197 7,725 421 3,633 8,954 5,472,597 Individuals 233,986 9,384,955 64,974 21,127 70,427 1,168 81,168 9,857,805 Total domestic 40,303,480 10,362,135 2,455,064 641,554 145,546 6,721 494,644 54,409,144 Foreign: Commercial and industrial 16,101,326 182 2,488,800 347,060 — 38,404 150,410 19,126,182 Banks and other financial institutions 8,583,432 — 492,831 10,458 — — — 9,086,721 Government and public institutions 296,870 — — — — — 2 296,872 Other 1,480 9,713 19,690 333 — 879 1,076 33,171 Total foreign 24,983,108 9,895 3,001,321 357,851 — 39,283 151,488 28,542,946 Total 65,286,588 10,372,030 5,456,385 999,405 145,546 46,004 646,132 82,952,090 2020 Domestic: Manufacturing 9,007,095 62,921 17,445 475,983 7,474 684 159,426 9,731,028 Construction and real estate 8,849,784 473,339 12,710 201,384 10,928 — 55,288 9,603,433 Services 5,600,528 159,657 2,943 131,783 16,602 15 80,983 5,992,511 Wholesale and retail 4,766,460 145,568 17,156 119,778 22,363 873 147,529 5,219,727 Transportation and communications 3,692,025 65,535 395 44,250 7,664 303 22,712 3,832,884 Banks and other financial institutions 4,595,441 1,593 347 24,686 429 — 11,946 4,634,442 Government and public institutions 2,198,796 9 — — — — — 2,198,805 Other industries (4) 3,106,282 2,684 2,230,748 15,238 372 15,038 18,985 5,389,347 Individuals 208,832 8,989,113 63,185 20,990 60,128 2,279 83,807 9,428,334 Total domestic 42,025,243 9,900,419 2,344,929 1,034,092 125,960 19,192 580,676 56,030,511 Foreign: Commercial and industrial 17,806,263 284 2,526,317 314,273 — 36,593 134,979 20,818,709 Banks and other financial institutions 9,745,247 — 726,823 3,207 — — — 10,475,277 Government and public institutions 303,393 — 13,129 762 — — — 317,284 Other 1,333 10,406 20,558 1,684 15 843 549 35,388 Total foreign (5) 27,856,236 10,690 3,286,827 319,926 15 37,436 135,528 31,646,658 Total 69,881,479 9,911,109 5,631,756 1,354,018 125,975 56,628 716,204 87,677,169 Notes: (1) Special attention obligors are watch obligors with debt in TDR or 90 days or more delinquent debt. Loans to such obligors are considered impaired. (2) The primary component of the retail portfolio segment is mortgage loans to individuals which obligor category is classified based on past due status. The trigger to reclassify obligors from normal obligors to watch obligors excluding special attention obligors is when the past due status is more than 30 days. (3) Non-impaired (4) Other industries of domestic includes trade receivables and lease receivables of consolidated VIEs. (5) Impaired loans to foreign borrowers decreased by ¥15,960 million due mainly to the sale of certain loans, partly offset by deterioration of credit status of certain other borrowers. Impaired loans The MHFG Group considers loans to be impaired when it is probable that the Group will be unable to collect all the scheduled payments of principal and interest when due according to the contractual terms of the loans. The Group classifies loans to special attention, intensive control, substantially bankrupt and bankrupt obligors as impaired loans, and all of the Group’s impaired loans are designated as nonaccrual loans. There are no loans that are ninety days past due and still accruing. The Group does not have any loans to borrowers that cause management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms for the periods presented other than those already designated as impaired loans. The table below presents impaired loans information at March 31, 2019 and 2020: Recorded investment (1) Unpaid principal balance Related allowance (3) Average recorded investment Interest income recognized (4) Requiring an allowance for loan losses Not requiring an allowance for loan losses (2) Total (in millions of yen) 2019 Domestic: Manufacturing 103,039 5,605 108,644 111,533 39,301 122,764 1,404 Construction and real estate 36,873 9,312 46,185 51,158 4,661 42,224 487 Services 64,021 9,552 73,573 79,736 16,311 67,679 1,058 Wholesale and retail 124,911 9,703 134,614 147,665 38,763 130,860 1,814 Transportation and communications 28,297 2,909 31,206 32,139 13,146 29,864 412 Banks and other financial institutions 6,473 3,827 10,300 10,300 1,327 10,671 109 Other industries 8,867 87 8,954 9,149 5,761 6,042 29 Individuals 37,488 43,680 81,168 88,331 2,630 86,082 1,326 Total domestic 409,969 84,675 494,644 530,011 121,900 496,186 6,639 Foreign: Total foreign (5) 119,079 32,409 151,488 164,984 47,345 113,559 1,518 Total 529,048 117,084 646,132 694,995 169,245 609,745 8,157 2020 Domestic: Manufacturing 152,865 6,561 159,426 162,742 62,879 139,123 2,292 Construction and real estate 47,413 7,875 55,288 62,064 8,366 50,343 593 Services 71,358 9,625 80,983 85,565 20,117 78,583 973 Wholesale and retail 139,338 8,191 147,529 158,933 48,582 139,042 1,845 Transportation and communications 20,203 2,509 22,712 23,555 7,318 25,549 383 Banks and other financial institutions 8,193 3,753 11,946 11,946 1,541 10,565 129 Other industries 18,709 276 18,985 20,716 8,606 14,512 194 Individuals 42,632 41,175 83,807 88,315 6,382 82,456 1,253 Total domestic 500,711 79,965 580,676 613,836 163,791 540,173 7,662 Foreign: Total foreign (5) 95,289 40,239 135,528 151,212 67,235 123,313 3,032 Total 596,000 120,204 716,204 765,048 231,026 663,486 10,694 Notes: (1) Amounts represent the outstanding balances of nonaccrual loans. The MHFG Group’s policy for placing loans in nonaccrual status corresponds to the Group’s definition of impaired loans. (2) These impaired loans do not require an allowance for loan losses because the MHFG Group has sufficient collateral to cover probable loan losses. (3) The allowance for loan losses on impaired loans includes the allowance for groups of loans which were collectively evaluated for impairment, in addition to the allowance for those loans that were individually evaluated for impairment. The total carrying amount of the groups of loans which were collectively evaluated for impairment at March 31, 2019 and 2020 was ¥257,099 million and ¥260,596 million, respectively. (4) Amounts represent the amount of interest income on impaired loans recognized on a cash basis and included in Interest income on loans in the consolidated statements of income. (5) The majority of total foreign consist of commercial and industrial loans. The remaining balance of impaired loans that have been partially charged off, was ¥25,097 million and ¥20,378 million as of March 31, 2019 and 2020, respectively. Troubled debt restructurings The MHFG Group considers a loan modification to be a TDR when, for economic or legal reasons related to the obligor’s financial difficulties, it grants a concession to the obligor that it would not otherwise consider. The Group considers the relevant obligor to be in financial difficulty generally when its obligor rating is E2 or below. The following table presents modified loans that were determined to be TDRs during the fiscal years ended March 31, 2019 and 2020: Loan forgiveness or debt to equity swaps Interest rate reduction and/or postponement of principal and/or interest Recorded investment (1) Charge-offs (in millions of yen) 2019 Domestic: Manufacturing — — 134,544 Construction and real estate — — 39,254 Services — — 87,468 Wholesale and retail — — 167,299 Transportation and communications — — 33,991 Banks and other financial institutions — — 17,286 Other industries — — 120 Individuals — — 42,330 Total domestic — — 522,292 Foreign: Total foreign (2) 984 1,964 44,033 Total 984 1,964 566,325 2020 Domestic: Manufacturing 689 3,806 148,564 Construction and real estate — — 31,803 Services — — 78,211 Wholesale and retail — 196 169,224 Transportation and communications — — 18,700 Banks and other financial institutions — — 16,962 Other industries — — 1,366 Individuals — — 14,000 Total domestic 689 4,002 478,830 Foreign: Total foreign (2) 466 4,906 114,159 Total 1,155 8,908 592,989 Notes: (1) Amounts represent the book values of loans immediately after the restructurings. (2) The majority of total foreign consist of commercial and industrial loans. Payment default is deemed to occur when the loan becomes three months past due or the obligor is downgraded to the category of substantially bankrupt or bankrupt. The following table presents payment defaults which occurred during the fiscal years ended March 31, 2019 and 2020 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment 2019 2020 (in millions of yen) Domestic: Manufacturing 1,173 3,752 Construction and real estate 121 345 Services 1,335 3,822 Wholesale and retail 15,087 19,018 Transportation and communications 878 824 Banks and other financial institutions 66 66 Other industries 1,650 — Individuals 2,152 2,545 Total domestic 22,462 30,372 Foreign: Total foreign 5,418 11,442 Total 27,880 41,814 Age analysis of past due loans The table below presents an analysis of the age of the recorded investment in loans that are past due at March 31, 2019 and 2020: 30-59 past due 60-89 past due 90 days or more past due Total past due Current Total (in millions of yen) 2019 Domestic: Manufacturing 2,210 513 7,036 9,759 9,544,095 9,553,854 Construction and real estate 1,010 1,054 31,092 33,156 8,917,421 8,950,577 Services 633 196 3,494 4,323 5,012,648 5,016,971 Wholesale and retail 1,614 1,415 7,868 10,897 5,148,459 5,159,356 Transportation and communications 363 256 2,119 2,738 3,690,753 3,693,491 Banks and other financial institutions 3 484 6 493 4,345,096 4,345,589 Government and public institutions — — — — 2,358,904 2,358,904 Other industries 2 — 57 59 5,472,538 5,472,597 Individuals 27,139 11,013 28,965 67,117 9,790,688 9,857,805 Total domestic 32,974 14,931 80,637 128,542 54,280,602 54,409,144 Foreign: Total foreign (Note) 668 211 26,316 27,195 28,515,751 28,542,946 Total 33,642 15,142 106,953 155,737 82,796,353 82,952,090 2020 Domestic: Manufacturing 1,109 386 10,997 12,492 9,718,536 9,731,028 Construction and real estate 1,266 687 21,518 23,471 9,579,962 9,603,433 Services 792 548 6,714 8,054 5,984,457 5,992,511 Wholesale and retail 1,748 2,446 11,972 16,166 5,203,561 5,219,727 Transportation and communications 56 35 2,051 2,142 3,830,742 3,832,884 Banks and other financial institutions — — 109 109 4,634,333 4,634,442 Government and public institutions — — — — 2,198,805 2,198,805 Other industries 28 20 1,326 1,374 5,387,973 5,389,347 Individuals 21,376 10,876 34,793 67,045 9,361,289 9,428,334 Total domestic 26,375 14,998 89,480 130,853 55,899,658 56,030,511 Foreign: Total foreign (Note) 1,214 181 28,722 30,117 31,616,541 31,646,658 Total 27,589 15,179 118,202 160,970 87,516,199 87,677,169 Note: The majority of total foreign consist of commercial and industrial loans. |