Loans | 5 . Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2017 and September 30, 2017: March 31, 2017 September 30, 2017 (in millions of yen) Domestic: Manufacturing 8,740,281 8,526,643 Construction and real estate 7,654,016 7,709,245 Services 4,759,225 4,923,838 Wholesale and retail 5,142,003 5,123,176 Transportation and communications 3,490,415 3,413,710 Banks and other financial institutions 4,006,401 4,247,285 Government and public institutions 8,532,246 9,981,557 Other industries (Note) 4,427,349 4,502,531 Individuals: Mortgage loans 9,964,633 9,702,129 Other 939,971 958,159 Total domestic 57,656,540 59,088,273 Foreign: Commercial and industrial 16,872,448 16,915,590 Banks and other financial institutions 6,759,921 6,897,692 Government and public institutions 959,948 1,088,753 Other (Note) 190,724 37,938 Total foreign 24,783,041 24,939,973 Total 82,439,581 84,028,246 Less: Unearned income and deferred loan fees—net 155,675 144,787 Total loans before allowance for loan losses 82,283,906 83,883,459 Note: Other industries of Domestic and Other of Foreign include trade receivables and lease receivables of consolidated VIEs. Net losses on sales of loans were ¥919 million and ¥3,739 million, including unrealized losses related to recording loans held for sale at the lower of cost or fair value of ¥310 million, and ¥3,707 million for the fiscal year ended March 31, 2017 and for the six months ended September 30, 2017, respectively. 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 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, 2017 and September 30, 2017: 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, 2017 Domestic: Manufacturing 5,313,232 2,599,760 90,825 67,734 276,771 11,589 1,314 379,056 8,740,281 Construction and real estate 4,199,022 2,641,436 558,321 15,585 165,836 16,023 317 57,476 7,654,016 Services 2,699,487 1,687,515 185,577 910 95,973 23,189 204 66,370 4,759,225 Wholesale and retail 2,244,214 2,369,842 200,003 22,785 124,846 32,911 501 146,901 5,142,003 Transportation and communications 2,584,367 739,781 82,543 1,092 50,319 9,698 — 22,615 3,490,415 Banks and other financial institutions 3,050,605 887,527 1,894 37,907 21,574 353 — 6,541 4,006,401 Government and public institutions 4,059,349 1,600 — 4,471,297 — — — — 8,532,246 Other industries (4) 1,873,137 591,109 3,535 1,906,756 4,613 410 41,179 6,610 4,427,349 Individuals — 289,809 10,312,739 80,566 26,288 89,066 1,434 104,702 10,904,604 Total domestic 26,023,413 11,808,379 11,435,437 6,604,632 766,220 183,239 44,949 790,271 57,656,540 Foreign: Commercial and industrial 9,310,432 4,814,906 173 2,153,757 312,275 — 90,722 190,183 16,872,448 Banks and other financial institutions 5,628,387 592,380 — 480,806 58,348 — — — 6,759,921 Government and public institutions 741,478 214,558 — 1,082 2,801 — — 29 959,948 Other (4) — 6,535 9,439 173,464 124 8 753 401 190,724 Total foreign 15,680,297 5,628,379 9,612 2,809,109 373,548 8 91,475 190,613 24,783,041 Total 41,703,710 17,436,758 11,445,049 9,413,741 1,139,768 183,247 136,424 980,884 82,439,581 September 30, 2017 Domestic: Manufacturing 5,302,937 2,718,865 85,978 46,881 225,293 10,880 239 135,570 8,526,643 Construction and real estate 4,341,519 2,583,327 533,436 8,471 174,429 16,592 — 51,471 7,709,245 Services 2,802,307 1,647,922 181,122 125,114 89,500 21,722 — 56,151 4,923,838 Wholesale and retail 2,241,712 2,395,149 190,225 13,830 110,009 31,369 669 140,213 5,123,176 Transportation and communications 2,511,302 753,838 79,972 1,948 30,502 9,275 — 26,873 3,413,710 Banks and other financial institutions 3,462,891 592,365 1,774 160,314 22,659 220 — 7,062 4,247,285 Government and public institutions 3,237,595 1,600 — 6,742,362 — — — — 9,981,557 Other industries (4) 2,376,483 188,887 3,634 1,918,680 2,368 289 8,927 3,263 4,502,531 Individuals — 300,201 10,081,604 69,829 25,766 84,265 1,275 97,348 10,660,288 Total domestic 26,276,746 11,182,154 11,157,745 9,087,429 680,526 174,612 11,110 517,951 59,088,273 Foreign: Commercial and industrial 9,442,125 4,635,302 206 2,221,178 383,128 — 79,905 153,746 16,915,590 Banks and other financial institutions 5,867,251 563,445 — 411,234 54,835 — 927 — 6,897,692 Government and public institutions 865,441 220,632 — 861 1,800 — — 19 1,088,753 Other (4) — 4,800 9,044 21,800 246 7 1,284 757 37,938 Total foreign 16,174,817 5,424,179 9,250 2,655,073 440,009 7 82,116 154,522 24,939,973 Total 42,451,563 16,606,333 11,166,995 11,742,502 1,120,535 174,619 93,226 672,473 84,028,246 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 (4) Other industries of Domestic and Other of Foreign include trade receivables and lease receivables of consolidated VIEs. 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, 2017 Domestic: Manufacturing 372,241 6,815 379,056 383,812 148,777 375,895 2,859 Construction and real estate 46,130 11,346 57,476 66,006 6,367 66,796 877 Services 58,366 8,004 66,370 72,261 20,122 66,050 1,173 Wholesale and retail 133,466 13,435 146,901 155,023 52,341 148,865 2,261 Transportation and communications 19,386 3,229 22,615 23,568 5,968 24,035 371 Banks and other financial 2,601 3,940 6,541 6,873 962 5,305 50 Other industries 6,484 126 6,610 6,740 1,999 6,053 91 Individuals 51,893 52,809 104,702 114,880 4,935 114,104 1,696 Total domestic 690,567 99,704 790,271 829,163 241,471 807,103 9,378 Foreign: Total foreign 160,563 30,050 190,613 209,129 61,102 169,192 2,040 Total 851,130 129,754 980,884 1,038,292 302,573 976,295 11,418 Recorded investment (1) Requiring Not (2) Total Unpaid Related (3) Average Interest ( 4 ) (in millions of yen) September 30, 2017 Domestic: Manufacturing 130,184 5,386 135,570 140,010 48,786 257,313 914 Construction and real estate 41,808 9,663 51,471 59,519 5,397 54,473 338 Services 46,498 9,653 56,151 63,777 12,280 61,260 432 Wholesale and retail 129,030 11,183 140,213 148,775 49,871 143,557 1,031 Transportation and communications 24,139 2,734 26,873 27,865 7,134 24,744 160 Banks and other financial institutions 3,100 3,962 7,062 7,395 1,433 6,802 29 Other industries 2,184 1,079 3,263 3,393 1,534 4,937 17 Individuals 46,492 50,856 97,348 102,916 4,657 101,025 729 Total domestic 423,435 94,516 517,951 553,650 131,092 654,111 3,650 Foreign: Total foreign 127,433 27,089 154,522 172,523 48,620 172,567 1,069 Total 550,868 121,605 672,473 726,173 179,712 826,678 4,719 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 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 small balance, homogeneous loans at March 31, 2017 and September 30, 2017 was ¥302,251 million and ¥266,915 million, respectively. (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 ¥26,513 million and ¥19,275 million as of March 31, 2017 and September 30, 2017, 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, 2016 and 2017: Loan forgiveness or debt to equity swaps Interest rate reduction Recorded investment (Note) Charge-offs (in millions of yen) 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 September 30, 2017 Domestic: Manufacturing — — 55,611 Construction and real estate — — 9,045 Services — — 18,740 Wholesale and retail — — 74,625 Transportation and communications — — 12,244 Banks and other financial institutions — — 3,461 Individuals — — 7,619 Total domestic — — 181,345 Foreign: Total foreign — — 13,303 Total — — 194,648 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, 2016 and 2017 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2016 September 30, 2017 (in millions of yen) Domestic: Manufacturing 1,801 2,006 Construction and real estate 1,621 70 Services 1,188 2,561 Wholesale and retail 4,614 13,396 Transportation and communications 771 201 Other industries — 130 Individuals 1,366 904 Total domestic 11,361 19,268 Foreign: Total foreign 30 4,588 Total 11,391 23,856 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, 2017 and September 30, 2017: 30-59 days 60-89 days 90 days or Total past Current Total (in millions of yen) March 31, 2017 Domestic: Manufacturing 1,938 360 7,767 10,065 8,730,216 8,740,281 Construction and real estate 2,818 947 32,523 36,288 7,617,728 7,654,016 Services 917 217 5,914 7,048 4,752,177 4,759,225 Wholesale and retail 1,330 2,834 5,585 9,749 5,132,254 5,142,003 Transportation and communications 384 322 1,859 2,565 3,487,850 3,490,415 Banks and other financial institutions — — — — 4,006,401 4,006,401 Government and public institutions — — — — 8,532,246 8,532,246 Other industries — — 69 69 4,427,280 4,427,349 Individuals 32,995 12,291 34,846 80,132 10,824,472 10,904,604 Total domestic 40,382 16,971 88,563 145,916 57,510,624 57,656,540 Foreign: Total foreign 546 216 95,719 96,481 24,686,560 24,783,041 Total 40,928 17,187 184,282 242,397 82,197,184 82,439,581 September 30, 2017 Domestic: Manufacturing 1,504 289 8,545 10,338 8,516,305 8,526,643 Construction and real estate 1,006 940 27,869 29,815 7,679,430 7,709,245 Services 2,076 1,537 4,898 8,511 4,915,327 4,923,838 Wholesale and retail 1,842 997 3,803 6,642 5,116,534 5,123,176 Transportation and communications 76 85 7,502 7,663 3,406,047 3,413,710 Banks and other financial institutions — — — — 4,247,285 4,247,285 Government and public institutions — — — — 9,981,557 9,981,557 Other industries 40 — 25 65 4,502,466 4,502,531 Individuals 31,787 11,185 34,554 77,526 10,582,762 10,660,288 Total domestic 38,331 15,033 87,196 140,560 58,947,713 59,088,273 Foreign: Total foreign 848 462 73,898 75,208 24,864,765 24,939,973 Total 39,179 15,495 161,094 215,768 83,812,478 84,028,246 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 ¥26,689 million and ¥20,546 million at March 31, 2017 and September 30, 2017, respectively. |