Loans | 5. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2018 and 2019: 2018 2019 (in millions of yen) Domestic: Manufacturing 8,156,341 9,558,146 Construction and real estate 8,101,668 8,954,823 Services 5,024,018 5,113,386 Wholesale and retail 5,112,673 5,163,267 Transportation and communications 3,564,869 3,622,130 Banks and other financial institutions 4,471,423 4,303,231 Government and public institutions 8,882,125 2,358,904 Other industries (Note) 5,018,387 5,477,452 Individuals: Mortgage loans 9,445,286 8,950,216 Other 883,724 907,589 Total domestic 58,660,514 54,409,144 Foreign: Commercial and industrial 17,195,159 19,086,511 Banks and other financial institutions 7,465,140 9,126,392 Government and public institutions 302,891 296,872 Other 37,636 33,171 Total foreign 25,000,826 28,542,946 Total 83,661,340 82,952,090 Less: Unearned income and deferred loan fees—net 146,696 152,147 Total loans before allowance for loan losses 83,514,644 82,799,943 Note: Other industries of Domestic includes trade receivables and lease receivables of consolidated VIEs. Net losses on sales of loans were ¥919 million, ¥87 million and ¥2,018 million, including unrealized losses related to recording loans held for sale at the lower of cost or fair value for the fiscal years ended March 31, 2017, 2018 and 2019, 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 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, 2018 and 2019: Normal obligors Watch obligors excluding (1) Impaired Total Corporate Retail (2) Other (3) Corporate Retail (2) Other (3) (in millions of yen) 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 2019 Domestic: Manufacturing 9,209,834 69,080 19,805 141,202 8,278 1,303 108,644 9,558,146 Construction and real estate 8,186,308 505,142 15,920 186,753 14,490 25 46,185 8,954,823 Services 4,761,724 165,643 3,281 90,578 18,586 1 73,573 5,113,386 Wholesale and retail 4,686,541 161,392 26,881 127,695 25,553 591 134,614 5,163,267 Transportation and communications 3,472,991 71,934 934 37,593 7,472 — 31,206 3,622,130 Banks and other financial institutions 4,262,125 1,534 72 28,881 319 — 10,300 4,303,231 Government and public institutions 2,358,899 5 — — — — — 2,358,904 Other industries (4) 3,131,072 2,450 2,323,197 7,725 421 3,633 8,954 5,477,452 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 16,061,655 182 2,488,800 347,060 — 38,404 150,410 19,086,511 Banks and other financial institutions 8,623,103 — 492,831 10,458 — — — 9,126,392 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 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 obligor category classification is mainly based on past due status. (3) Non-impaired (4) Other industries of Domestic includes trade receivables and lease receivables of consolidated VIEs. 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, 2018 and 2019: Recorded investment (1) Unpaid Related (3) Average Interest (4) Requiring an Not (2) Total (in millions of yen) 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 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 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 2019 was ¥245,809 million and ¥257,099 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 ¥29,037 million and ¥25,097 million as of March 31, 2018 and 2019, 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, 2018 and 2019: Loan forgiveness or debt to Interest rate Recorded (1 ) Charge-offs (in millions of yen) 2018 Domestic: Manufacturing — — 110,624 Construction and real estate — — 13,430 Services — — 40,774 Wholesale and retail — — 148,560 Transportation and communications — — 27,294 Banks and other financial institutions — — 8,529 Other industries — — 246 Individuals — — 14,960 Total domestic — — 364,417 Foreign: Total foreign (2) — — 44,010 Total — — 408,427 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 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, 2018 and 2019 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment 2018 2019 (in millions of yen) Domestic: Manufacturing 4,019 1,173 Construction and real estate 80 121 Services 4,469 1,335 Wholesale and retail 25,710 15,087 Transportation and communications 264 878 Banks and other financial institutions — 66 Other industries 130 1,650 Individuals 1,819 2,152 Total domestic 36,491 22,462 Foreign: Total foreign 4,588 5,418 Total 41,079 27,880 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 2019: 30-59 days 60-89 days 90 days or Total past Current Total (in millions of yen) 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 2019 Domestic: Manufacturing 2,210 513 7,036 9,759 9,548,387 9,558,146 Construction and real estate 1,010 1,054 31,092 33,156 8,921,667 8,954,823 Services 633 196 3,494 4,323 5,109,063 5,113,386 Wholesale and retail 1,614 1,415 7,868 10,897 5,152,370 5,163,267 Transportation and communications 363 256 2,119 2,738 3,619,392 3,622,130 Banks and other financial institutions 3 484 6 493 4,302,738 4,303,231 Government and public institutions — — — — 2,358,904 2,358,904 Other industries 2 — 57 59 5,477,393 5,477,452 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 Note: The majority of Total foreign consist of Commercial and Industrial loans. |