Loans | 4. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2018 and September 30, 2018: March 31, 2018 September 30, 2018 (in millions of yen) Domestic: Manufacturing 8,156,341 8,469,440 Construction and real estate 8,101,668 8,475,834 Services 5,024,018 5,288,571 Wholesale and retail 5,112,673 5,168,408 Transportation and communications 3,564,869 3,710,990 Banks and other financial institutions 4,471,423 4,455,338 Government and public institutions 8,882,125 5,776,149 Other industries (Note) 5,018,387 5,059,891 Individuals: Mortgage loans 9,445,286 9,191,280 Other 883,724 867,192 Total domestic 58,660,514 56,463,093 Foreign: Commercial and industrial 17,195,159 19,322,908 Banks and other financial institutions 7,465,140 8,527,586 Government and public institutions 302,891 625,263 Other 37,636 41,699 Total foreign 25,000,826 28,517,456 Total 83,661,340 84,980,549 Less: Unearned income and deferred loan fees—net 146,696 150,301 Total loans before allowance for loan losses 83,514,644 84,830,248 Note: Other industries of Domestic includes trade receivables and lease receivables of consolidated VIEs. Net losses on sales of loans were ¥3,739 million and ¥1,060 million, including unrealized losses related to recording loans held for sale at the lower of cost or fair value for the six months ended September 30, 2017 and 2018, respectively. The gains and losses on sales of loans are recorded in Other noninterest income and expenses, 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 Mizuho Trust & Banking Co., Ltd. (“MHTB”): Obligor category (1)(2) 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 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 troubled debt restructuring (“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. The table below presents credit quality information of loans based on the MHFG Group’s internal rating system at March 31, 2018 and September 30, 2018: Normal obligors Watch obligors (1) Corporate Retail (2) Other (3) Corporate Retail (2) Other (3) Impaired Total (in millions of yen) March 31, 2018 Domestic: Manufacturing 7,705,495 77,947 23,343 197,465 9,775 246 142,070 8,156,341 Construction and real estate 7,317,972 541,778 13,332 172,287 15,466 — 40,833 8,101,668 Services 4,535,793 172,045 141,718 95,223 21,109 55 58,075 5,024,018 Wholesale and retail 4,636,236 177,965 17,305 121,832 27,975 476 130,884 5,112,673 Transportation and communications 3,414,781 76,532 1,774 35,339 8,916 — 27,527 3,564,869 Banks and other financial institutions 4,244,101 1,640 196,431 16,716 194 — 12,341 4,471,423 Government and public institutions 3,010,708 — 5,871,417 — — — — 8,882,125 Other industries (4) 2,716,502 3,536 2,170,442 2,708 259 121,201 3,739 5,018,387 Individuals 222,410 9,822,244 88,044 23,491 81,550 1,109 90,162 10,329,010 Total domestic 37,803,998 10,873,687 8,523,806 665,061 165,244 123,087 505,631 58,660,514 Foreign: Commercial and industrial 14,192,930 209 2,432,189 398,231 — 64,950 106,650 17,195,159 Banks and other financial institutions 6,949,036 — 487,978 28,126 — — — 7,465,140 Government and public institutions 301,072 — — — — — 1,819 302,891 Other 1,906 9,245 23,730 242 6 1,347 1,160 37,636 Total foreign 21,444,944 9,454 2,943,897 426,599 6 66,297 109,629 25,000,826 Total 59,248,942 10,883,141 11,467,703 1,091,660 165,250 189,384 615,260 83,661,340 September 30, 2018 Domestic: Manufacturing 8,130,139 72,651 15,714 124,530 8,305 522 117,579 8,469,440 Construction and real estate 7,709,697 522,815 10,358 178,226 15,083 — 39,655 8,475,834 Services 4,731,189 168,384 206,848 91,898 18,863 — 71,389 5,288,571 Wholesale and retail 4,694,532 169,576 17,496 132,233 27,000 489 127,082 5,168,408 Transportation and communications 3,558,659 73,437 529 39,194 8,313 — 30,858 3,710,990 Banks and other financial institutions 4,236,485 1,741 184,392 23,084 265 — 9,371 4,455,338 Government and public institutions 2,594,132 — 3,182,017 — — — — 5,776,149 Other industries (4) 2,888,378 2,996 2,148,915 8,346 375 5,447 5,434 5,059,891 Individuals 226,932 9,579,329 67,290 20,700 76,161 1,144 86,916 10,058,472 Total domestic 38,770,143 10,590,929 5,833,559 618,211 154,365 7,602 488,284 56,463,093 Foreign: Commercial and industrial 16,430,107 116 2,431,047 341,687 — 43,503 76,448 19,322,908 Banks and other financial institutions 7,988,472 — 515,716 23,389 — — 9 8,527,586 Government and public institutions 623,460 — — — — — 1,803 625,263 Other 8,271 9,024 21,527 342 65 1,170 1,300 41,699 Total foreign 25,050,310 9,140 2,968,290 365,418 65 44,673 79,560 28,517,456 Total 63,820,453 10,600,069 8,801,849 983,629 154,430 52,275 567,844 84,980,549 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 includes 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”). 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. 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 in doubt, 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, 2018 Domestic: Manufacturing 135,083 6,987 142,070 146,857 45,750 218,899 1,869 Construction and real estate 31,557 9,276 40,833 48,752 4,411 49,926 516 Services 48,691 9,384 58,075 64,348 13,305 60,198 919 Wholesale and retail 119,463 11,421 130,884 139,556 42,798 139,333 1,842 Transportation and communications 25,019 2,508 27,527 28,480 6,862 25,672 370 Banks and other financial institutions 8,392 3,949 12,341 12,341 3,176 8,648 78 Other industries 3,650 89 3,739 3,869 3,563 4,537 53 Individuals 43,326 46,836 90,162 95,338 4,315 97,404 1,402 Total domestic 415,181 90,450 505,631 539,541 124,180 604,617 7,049 Foreign: Total foreign (5) 63,346 46,283 109,629 125,329 28,333 151,588 1,042 Total 478,527 136,733 615,260 664,870 152,513 756,205 8,091 Recorded investment (1) Requiring Not (2) Total Unpaid Related (3) Average Interest (4) (in millions of yen) September 30, 2018 Domestic: Manufacturing 111,026 6,553 117,579 122,029 40,969 129,824 714 Construction and real estate 30,818 8,837 39,655 47,362 4,032 40,244 240 Services 62,557 8,832 71,389 76,953 17,226 64,732 493 Wholesale and retail 117,212 9,870 127,082 136,833 39,610 128,983 905 Transportation and communications 28,043 2,815 30,858 31,814 8,688 29,193 198 Banks and other financial institutions 5,545 3,826 9,371 9,371 813 10,856 47 Other industries 5,357 77 5,434 5,565 4,000 4,586 15 Individuals 40,982 45,934 86,916 91,775 2,985 88,539 642 Total domestic 401,540 86,744 488,284 521,702 118,323 496,957 3,254 Foreign: Total foreign (5) 32,591 46,969 79,560 93,212 13,857 94,595 517 Total 434,131 133,713 567,844 614,914 132,180 591,552 3,771 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, 2018 and September 30, 2018 was ¥245,809 million and ¥252,407 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, which have been partially charged off, was ¥29,037 million and ¥27,759 million as of March 31, 2018 and September 30, 2018, 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 six months ended September 30, 2017 and 2018: Loan forgiveness or debt to equity swaps Interest rate reduction Recorded investment (1) Charge-offs (in millions of yen) 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 (2) — — 13,303 Total — — 194,648 September 30, 2018 Domestic: Manufacturing — — 51,161 Construction and real estate — — 7,764 Services — — 29,203 Wholesale and retail — — 75,593 Transportation and communications — — 13,999 Banks and other financial institutions — — 7,160 Individuals — — 8,866 Total domestic — — 193,746 Foreign: Total foreign (2) 1,008 2,012 9,493 Total 1,008 2,012 203,239 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 six months ended September 30, 2017 and 2018 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2017 September 30, 2018 (in millions of yen) Domestic: Manufacturing 2,006 383 Construction and real estate 70 390 Services 2,561 714 Wholesale and retail 13,396 6,700 Transportation and communications 201 409 Other industries 130 — Individuals 904 2,241 Total domestic 19,268 10,837 Foreign: Total foreign 4,588 — Total 23,856 10,837 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, 2018 and September 30, 2018: 30-59 days 60-89 days 90 days or Total past Current Total (in millions of yen) March 31, 2018 Domestic: Manufacturing 585 470 8,037 9,092 8,147,249 8,156,341 Construction and real estate 1,641 474 28,633 30,748 8,070,920 8,101,668 Services 1,977 1,142 5,051 8,170 5,015,848 5,024,018 Wholesale and retail 1,704 1,083 6,639 9,426 5,103,247 5,112,673 Transportation and communications 356 639 1,828 2,823 3,562,046 3,564,869 Banks and other financial institutions — 1,301 — 1,301 4,470,122 4,471,423 Government and public institutions — — — — 8,882,125 8,882,125 Other industries 33 12 37 82 5,018,305 5,018,387 Individuals 31,566 12,426 31,444 75,436 10,253,574 10,329,010 Total domestic 37,862 17,547 81,669 137,078 58,523,436 58,660,514 Foreign: Total foreign (Note) 897 450 41,316 42,663 24,958,163 25,000,826 Total 38,759 17,997 122,985 179,741 83,481,599 83,661,340 September 30, 2018 Domestic: Manufacturing 594 416 7,714 8,724 8,460,716 8,469,440 Construction and real estate 1,461 927 26,369 28,757 8,447,077 8,475,834 Services 1,006 1,014 4,121 6,141 5,282,430 5,288,571 Wholesale and retail 2,829 833 6,626 10,288 5,158,120 5,168,408 Transportation and communications 53 707 1,563 2,323 3,708,667 3,710,990 Banks and other financial institutions 90 6 — 96 4,455,242 4,455,338 Government and public institutions — — — — 5,776,149 5,776,149 Other industries — — 45 45 5,059,846 5,059,891 Individuals 29,699 12,522 31,885 74,106 9,984,366 10,058,472 Total domestic 35,732 16,425 78,323 130,480 56,332,613 56,463,093 Foreign: Total foreign (Note) 876 348 40,843 42,067 28,475,389 28,517,456 Total 36,608 16,773 119,166 172,547 84,808,002 84,980,549 Note: The majority of Total foreign consist of Commercial and Industrial loans. 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 ¥86,153 million and ¥15,758 million at March 31, 2018 and September 30, 2018, respectively. |