Loans | 4. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2016 and September 30, 2016: March 31, 2016 September 30, 2016 (in millions of yen) Domestic: Manufacturing 8,344,808 8,086,048 Construction and real estate 7,733,513 7,666,062 Services 4,655,704 4,560,155 Wholesale and retail 5,408,850 5,100,718 Transportation and communications 3,267,902 3,528,283 Banks and other financial institutions 3,632,481 3,579,276 Government and public institutions 3,395,784 5,682,739 Other industries (Note) 4,619,336 4,244,129 Individuals: Mortgage loans 10,589,646 10,241,326 Other 924,408 912,106 Total domestic 52,572,432 53,600,842 Foreign: Commercial and industrial 17,319,284 15,784,820 Banks and other financial institutions 6,382,449 6,022,059 Government and public institutions 1,174,665 921,697 Other (Note) 273,695 202,798 Total foreign 25,150,093 22,931,374 Total 77,722,525 76,532,216 Less: Unearned income and deferred loan fees—net 167,156 150,308 Total loans before allowance for loan losses 77,555,369 76,381,908 Note: Other industries of Domestic and Other of Foreign include trade receivables and lease receivables of consolidated VIEs. 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 and pool allocations 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 groups of small balance, homogeneous loans. The Group pools loans with similar risk characteristics, and the risk is assessed 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 Mizuho Bank, Ltd. (“MHBK”) and Mizuho Trust & Banking Co., Ltd. (“MHTB”): Obligor category Obligor rating 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 (Note) 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. Note: Special attention obligors are watch obligors with debt in troubled debt restructuring (“TDR”) or 90 days or more delinquent debt. Loans to such obligors are considered impaired. The table below presents credit quality information of loans based on the MHFG Group’s internal rating system at March 31, 2016 and September 30, 2016: Normal obligors Watch obligors (1) A-B C-D Retail (2) Other (3) E1-E2 Retail (2) Other (3) Impaired Total (in millions of yen) March 31, 2016 Domestic: Manufacturing 4,859,256 2,681,958 103,343 148,102 163,213 12,473 2,958 373,505 8,344,808 Construction and real estate 3,956,798 2,709,617 601,251 157,057 215,244 16,408 255 76,883 7,733,513 Services 2,611,296 1,674,328 195,140 2,380 81,704 24,846 — 66,010 4,655,704 Wholesale and retail 2,240,228 2,552,552 223,677 57,865 147,404 39,486 546 147,092 5,408,850 Transportation and communications 2,410,967 695,697 86,094 380 35,090 10,518 — 29,156 3,267,902 Banks and other financial institutions 2,719,047 881,405 2,234 3,788 22,303 264 — 3,440 3,632,481 Government and public institutions 3,181,241 4,047 — 210,496 — — — — 3,395,784 Other industries 1,954,222 685,258 3,501 1,929,712 7,053 329 35,315 3,946 4,619,336 Individuals — 259,646 10,891,538 107,131 34,744 96,729 1,659 122,607 11,514,054 Total domestic 23,933,055 12,144,508 12,106,778 2,616,911 706,755 201,053 40,733 822,639 52,572,432 Foreign: Total foreign 15,540,347 5,748,131 8,382 3,132,856 472,696 10 80,607 167,064 25,150,093 Total 39,473,402 17,892,639 12,115,160 5,749,767 1,179,451 201,063 121,340 989,703 77,722,525 September 30, 2016 Domestic: Manufacturing 4,821,589 2,511,839 94,614 114,648 152,447 12,020 3,768 375,123 8,086,048 Construction and real estate 4,038,679 2,662,926 580,874 101,261 199,136 16,775 384 66,027 7,666,062 Services 2,591,663 1,617,784 186,542 1,495 71,778 25,071 51 65,771 4,560,155 Wholesale and retail 2,158,490 2,368,145 205,881 32,117 145,727 37,476 281 152,601 5,100,718 Transportation and communications 2,682,877 688,034 84,095 205 43,046 9,691 — 20,335 3,528,283 Banks and other financial institutions 2,698,093 842,036 1,812 554 30,461 385 — 5,935 3,579,276 Government and public institutions 4,802,983 3,750 — 876,006 — — — — 5,682,739 Other industries 1,865,412 574,973 3,253 1,753,107 5,154 402 34,224 7,604 4,244,129 Individuals — 271,561 10,561,515 79,597 31,722 92,621 1,413 115,003 11,153,432 Total domestic 25,659,786 11,541,048 11,718,586 2,958,990 679,471 194,441 40,121 808,399 53,600,842 Foreign: Total foreign 14,474,511 5,101,484 9,116 2,695,051 428,832 9 72,470 149,901 22,931,374 Total 40,134,297 16,642,532 11,727,702 5,654,041 1,108,303 194,450 112,591 958,300 76,532,216 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) Amounts represent small balance, homogeneous loans which are subject to pool allocations. (3) Non-impaired Impaired loans Loans are considered impaired when, based on current information and events, it is probable that the MHFG Group will be unable to collect all the scheduled payments of principal and interest when due according to the contractual terms of the loans. Factors considered by management in determining if a loan is impaired include delinquency status and the ability of the debtor to make payment of the principal and interest when due. The Group classifies loans to special attention, intensive control, substantially bankrupt and bankrupt obligors as impaired loans. Impaired loans include loans past due for 90 days or more and restructured loans that meet the definition of a TDR in accordance with ASC 310, “Receivables” (“ASC 310”). 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. All of the MHFG Group’s impaired loans are designated as nonaccrual loans and thus interest accruals and the amortization of net origination fees are suspended and capitalized interest is written off. Cash received on nonaccrual loans is accounted for as a reduction of the loan principal if the ultimate collectibility of the principal amount is uncertain, otherwise, as interest income. Loans are not restored to accrual status until interest and principal payments are current and future payments are reasonably assured. Impaired loans are restored to non-impaired non-impaired Recorded investment (1) Requiring Not (2) Total Unpaid Related (3) Average Interest (4) (in millions of yen) March 31, 2016 Domestic: Manufacturing 365,361 8,144 373,505 379,642 138,676 410,491 7,930 Construction and real estate 59,883 17,000 76,883 87,516 10,130 89,075 1,246 Services 56,695 9,315 66,010 72,603 19,095 69,525 1,292 Wholesale and retail 134,425 12,667 147,092 157,215 46,304 149,324 2,376 Transportation and communications 25,665 3,491 29,156 30,497 5,694 33,119 630 Banks and other financial institutions 3,390 50 3,440 3,440 1,095 5,188 42 Other industries 3,591 355 3,946 4,132 799 2,665 64 Individuals 63,367 59,240 122,607 135,325 6,085 133,015 2,058 Total domestic 712,377 110,262 822,639 870,370 227,878 892,402 15,638 Foreign: Total foreign 148,471 18,593 167,064 180,870 61,308 186,440 2,629 Total 860,848 128,855 989,703 1,051,240 289,186 1,078,842 18,267 Recorded investment (1) Requiring Not (2) Total Unpaid Related (3) Average Interest (4) (in millions of yen) September 30, 2016 Domestic: Manufacturing 367,787 7,336 375,123 381,412 141,908 374,314 1,404 Construction and real estate 51,468 14,559 66,027 75,170 7,712 71,455 572 Services 58,030 7,741 65,771 72,960 19,725 65,890 604 Wholesale and retail 141,135 11,466 152,601 161,702 50,449 149,847 1,222 Transportation and communications 16,508 3,827 20,335 21,376 4,567 24,746 215 Banks and other financial institutions 3,072 2,863 5,935 5,935 1,055 4,687 30 Other industries 7,543 61 7,604 7,790 2,277 5,775 43 Individuals 57,061 57,942 115,003 126,924 5,886 118,805 967 Total domestic 702,604 105,795 808,399 853,269 233,579 815,519 5,057 Foreign: Total foreign 134,395 15,506 149,901 163,841 59,433 158,482 888 Total 836,999 121,301 958,300 1,017,110 293,012 974,001 5,945 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 small balance, homogeneous loans totaling ¥347,839 million and ¥330,764 million as of March 31, 2016 and September 30, 2016 which were collectively evaluated for impairment, in addition to the allowance for those that were individually evaluated for impairment. (4) Amounts represent gross interest income on impaired loans which were included in Interest income on loans in the consolidated statements of income. The remaining balance of impaired loans which had been partially charged off was ¥31,933 million and ¥28,803 million as of March 31, 2016 and September 30, 2016, respectively. Troubled debt restructurings The MHFG Group considers a TDR to be a restructuring in which it, for economic or legal reasons related to the obligor’s financial difficulties, grants a concession to the obligor that it would not otherwise consider. The Group considers the relevant obligor to be in financial difficulty when its obligor rating is E2 or below. The following table presents TDRs that were entered into during the six months ended September 30, 2015 and 2016: Loan forgiveness or debt to equity swaps Interest rate reduction Recorded investment (Note) Charge-offs (in millions of yen) September 30, 2015 Domestic: Manufacturing 67,058 34,081 60,865 Construction and real estate — — 15,059 Services — — 23,345 Wholesale and retail — — 77,097 Transportation and communications 49 279 12,230 Banks and other financial institutions — — 4,776 Other industries — — 2,933 Individuals — — 17,066 Total domestic 67,107 34,360 213,371 Foreign: Total foreign — — 23,971 Total 67,107 34,360 237,342 September 30, 2016 Domestic: Manufacturing — — 54,476 Construction and real estate — — 8,596 Services — — 21,951 Wholesale and retail — — 87,237 Transportation and communications — — 8,656 Banks and other financial institutions — — 3,198 Other industries — — 2,274 Individuals — — 9,205 Total domestic — — 195,593 Foreign: Total foreign — — 10,849 Total — — 206,442 Note: Amounts represent the book values of loans immediately after the restructurings. 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 six months ended September 30, 2015 and 2016 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2015 September 30, 2016 (in millions of yen) Domestic: Manufacturing 2,890 1,801 Construction and real estate 1,731 1,621 Services 2,710 1,188 Wholesale and retail 13,097 4,614 Transportation and communications 833 771 Individuals 2,068 1,366 Total domestic 23,329 11,361 Foreign: Total foreign 6,901 30 Total 30,230 11,391 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, 2016 and September 30, 2016: 30-59 days 60-89 days 90 days or Total past Current Total (in millions of yen) March 31, 2016 Domestic: Manufacturing 1,555 163 9,454 11,172 8,333,636 8,344,808 Construction and real estate 2,713 1,024 35,691 39,428 7,694,085 7,733,513 Services 2,479 223 7,016 9,718 4,645,986 4,655,704 Wholesale and retail 3,193 886 8,861 12,940 5,395,910 5,408,850 Transportation and communications 594 81 2,033 2,708 3,265,194 3,267,902 Banks and other financial institutions — — — — 3,632,481 3,632,481 Government and public institutions — — — — 3,395,784 3,395,784 Other industries — — 29 29 4,619,307 4,619,336 Individuals 38,682 13,570 38,413 90,665 11,423,389 11,514,054 Total domestic 49,216 15,947 101,497 166,660 52,405,772 52,572,432 Foreign: Total foreign 859 2,598 30,000 33,457 25,116,636 25,150,093 Total 50,075 18,545 131,497 200,117 77,522,408 77,722,525 September 30, 2016 Domestic: Manufacturing 1,467 41 11,060 12,568 8,073,480 8,086,048 Construction and real estate 2,449 1,488 35,538 39,475 7,626,587 7,666,062 Services 1,030 572 8,046 9,648 4,550,507 4,560,155 Wholesale and retail 1,561 681 6,914 9,156 5,091,562 5,100,718 Transportation and communications 279 — 2,039 2,318 3,525,965 3,528,283 Banks and other financial institutions 16 — — 16 3,579,260 3,579,276 Government and public institutions — — — — 5,682,739 5,682,739 Other industries 41 14 28 83 4,244,046 4,244,129 Individuals 38,201 10,375 38,490 87,066 11,066,366 11,153,432 Total domestic 45,044 13,171 102,115 160,330 53,440,512 53,600,842 Foreign: Total foreign 35,917 1,251 43,508 80,676 22,850,698 22,931,374 Total 80,961 14,422 145,623 241,006 76,291,210 76,532,216 Loans held for sale Loans that have been identified for sale are classified as loans held for sale within Other assets and are accounted for at the lower of cost or fair value. The outstanding balance of loans held for sale was ¥33,133 million and ¥35,024 million at March 31, 2016 and September 30, 2016, respectively. |