Loans | 4. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2019 and September 30, 2019: March 31, 2019 September 30, 2019 (in millions of yen) Domestic: Manufacturing 9,558,146 9,661,265 Construction and real estate 8,954,823 9,193,059 Services 5,113,386 5,486,164 Wholesale and retail 5,163,267 5,292,337 Transportation and communications 3,622,130 3,751,962 Banks and other financial institutions 4,303,231 4,460,760 Government and public institutions 2,358,904 2,186,690 Other industries (Note) 5,477,452 5,581,548 Individuals: Mortgage loans 8,950,216 8,753,545 Other 907,589 869,309 Total domestic 54,409,144 55,236,639 Foreign: Commercial and industrial 19,086,511 18,905,059 Banks and other financial institutions 9,126,392 9,489,618 Government and public institutions 296,872 338,037 Other 33,171 34,376 Total foreign 28,542,946 28,767,090 Total 82,952,090 84,003,729 Less: Unearned income and deferred loan fees - 152,147 147,538 Total loans before allowance for loan losses 82,799,943 83,856,191 Note: Other industries of d Net losses on sales of loans were ¥1,060 million and ¥179 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, 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 Mizuho Bank, Ltd. (“MHBK”) and Mizuho Trust & Banking Co., Ltd. (“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 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. (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 September 30, 2019: Normal obligors Watch obligors excluding special attention obligors (1) Corporate Retail (2) Other (3) Corporate Retail (2) Other (3) Impaired loans Total (in millions of yen) March 31, 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 September 30, 2019 Domestic: Manufacturing 9,299,310 66,098 14,732 123,362 7,921 542 149,300 9,661,265 Construction and real estate 8,452,801 486,803 11,751 179,437 12,710 — 49,557 9,193,059 Services 5,113,878 160,329 1,883 111,672 17,210 — 81,192 5,486,164 Wholesale and retail 4,839,416 152,789 17,127 123,201 24,216 605 134,983 5,292,337 Transportation and communications 3,608,666 67,073 283 45,291 7,920 — 22,729 3,751,962 Banks and other financial institutions 4,411,489 1,697 276 37,516 334 — 9,448 4,460,760 Government and public institutions 2,186,682 8 — — — — — 2,186,690 Other industries (4) 3,155,810 2,384 2,384,867 12,120 407 10,364 15,596 5,581,548 Individuals 191,099 9,182,326 63,795 36,061 66,080 1,098 82,395 9,622,854 Total domestic 41,259,151 10,119,507 2,494,714 668,660 136,798 12,609 545,200 55,236,639 Foreign: Commercial and industrial 16,104,914 292 2,367,172 317,303 — 33,750 81,628 18,905,059 Banks and other financial institutions 8,838,656 — 638,508 12,454 — — — 9,489,618 Government and public institutions 338,037 — — — — — — 338,037 Other 1,432 9,583 19,316 1,755 — 994 1,296 34,376 Total foreign 25,283,039 9,875 3,024,996 331,512 — 34,744 82,924 28,767,090 Total 66,542,190 10,129,382 5,519,710 1,000,172 136,798 47,353 628,124 84,003,729 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 o (4) Other industries of d 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 an allowance for loan losses Not requiring an allowance for loan losses (2) Total Unpaid principal balance Related allowance (3) Average recorded investment Interest income recognized (4) (in millions of yen) March 31, 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 Recorded investment (1) Requiring an allowance for loan losses Not requiring an allowance for loan losses (2) Total Unpaid principal balance Related allowance (3) Average recorded investment Interest income recognized (4) (in millions of yen) September 30, 2019 Domestic: Manufacturing 100,021 49,279 149,300 152,358 35,530 128,972 796 Construction and real estate 39,756 9,801 49,557 56,503 8,491 47,871 279 Services 72,044 9,148 81,192 86,259 16,689 77,383 460 Wholesale and retail 125,938 9,045 134,983 151,913 43,339 134,798 850 Transportation and communications 20,272 2,457 22,729 23,628 6,534 26,968 212 Banks and other financial institutions 5,688 3,760 9,448 9,447 1,001 9,874 51 Other industries 15,323 273 15,596 15,720 6,290 12,275 96 Individuals 40,352 42,043 82,395 87,189 3,317 81,781 584 Total domestic 419,394 125,806 545,200 583,017 121,191 519,922 3,328 Foreign: Total foreign (5) 55,639 27,285 82,924 96,539 31,200 117,206 1,398 Total 475,033 153,091 628,124 679,556 152,391 637,128 4,726 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 September 30, 2019 was ¥257,099 million and ¥250,121 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 t c i The remaining balance of impaired loans that have been partially charged off, was ¥25,097 million and ¥20,430 million as of March 31, 2019 and September 30, 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 six months ended September 30, 2018 and 2019: Loan forgiveness or debt to equity swaps Interest rate reduction and/or postponement of principal and/or Recorded investment (1) (in millions of yen) 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 September 30, 2019 Domestic: Manufacturing 689 3,806 57,879 Construction and real estate — — 15,478 Services — — 44,185 Wholesale and retail — — 77,117 Transportation and communications — — 7,916 Banks and other financial institutions — — 7,639 Other industries — — 639 Individuals — — 8,074 Total domestic 689 3,806 218,927 Foreign: Total foreign (2) 470 4,922 38,646 Total 1,159 8,728 257,573 Notes: (1) Amounts represent the book values of loans immediately after the restructurings. (2) The majority of t c i 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, 2018 and 2019 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2018 September 30, 2019 (in millions of yen) Domestic: Manufacturing 383 2,391 Construction and real estate 390 171 Services 714 318 Wholesale and retail 6,700 6,504 Transportation and communications 409 86 Other industries — — Individuals 2,241 884 Total domestic 10,837 10,354 Foreign: Total foreign — 6,436 Total 10,837 16,790 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 September 30, 2019: 30-59 days past due 60-89 days past due 90 days or more past due Total past due Current Total (in millions of yen) March 31, 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 September 30, 2019 Domestic: Manufacturing 733 983 7,601 9,317 9,651,948 9,661,265 Construction and real estate 834 849 28,678 30,361 9,162,698 9,193,059 Services 390 2,986 5,171 8,547 5,477,617 5,486,164 Wholesale and retail 2,317 1,226 11,460 15,003 5,277,334 5,292,337 Transportation and communications 106 366 2,154 2,626 3,749,336 3,751,962 Banks and other financial institutions 116 — 41 157 4,460,603 4,460,760 Government and public institutions — — — — 2,186,690 2,186,690 Other industries — — 221 221 5,581,327 5,581,548 Individuals 22,918 26,303 32,367 81,588 9,541,266 9,622,854 Total domestic 27,414 32,713 87,693 147,820 55,088,819 55,236,639 Foreign: Total foreign (Note) 1,181 249 25,936 27,366 28,739,724 28,767,090 Total 28,595 32,962 113,629 175,186 83,828,543 84,003,729 Note: The majority of t c i 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 ¥24,921 million and ¥68,569 million at March 31, 2019 and September 30, 2019, respectively . |