Loans | 4. Loans The table below presents loans outstanding by domicile and industry of borrower at March 31, 2020 and September 30, 2020: March 31, 2020 September 30, 2020 (in millions of yen) Domestic: Manufacturing 9,731,028 11,700,375 Construction and real estate 9,603,433 10,172,843 Services 5,992,511 6,294,310 Wholesale and retail 5,219,727 5,415,605 Transportation and communications 3,832,884 3,978,708 Banks and other financial institutions 4,634,442 4,719,863 Government and public institutions 2,198,805 2,639,956 Other industries (Note) 5,389,347 5,517,220 Individuals: Mortgage loans 8,567,099 8,357,042 Other 861,235 798,475 Total domestic 56,030,511 59,594,397 Foreign: Commercial and industrial 20,818,709 20,190,048 Banks and other financial institutions 10,475,277 10,502,326 Government and public institutions 317,284 308,171 Other 35,388 37,572 Total foreign 31,646,658 31,038,117 Total 87,677,169 90,632,514 Less: Unearned income and deferred loan fees—net 149,081 156,767 Total loans before allowance for credit losses on loans 87,528,088 90,475,747 Note: Other industries of domestic includes trade receivables and lease receivables of consolidated VIEs. Loans are generally carried at the principal amount adjusted for unearned income and deferred net nonrefundable loan fees and costs. Loan origination fees, net of certain direct origination costs, are deferred and recognized over the contractual life of the loan as an adjustment of yield using a method that approximates the interest method. Interest income on performing loans is accrued and credited to income as it is earned. Unearned income and discounts or premiums on purchased loans are deferred and recognized over the life of the loan using a method that approximates the interest method. Net losses on sales of loans were ¥179 million and ¥1,178 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, 2019 and 2020, 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 losses expected 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. See Note 3 “Investments” for the credit losses related to held-to-maturity available-for-sale The Group does not record expected credit losses reversed interest rued income. The table below presents credit quality information of loans MHFG 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 TDR or 90 days or more delinquent debt. Loans to such obligors are considered nonaccrual. (2) The Group classifies loans to special attention, intensive control, substantially bankrupt and bankrupt obligors as nonaccrual loans. September 30, 2020 March 31, 2020 Term loans by origination year Revolving Total Total 2020 2019 2018 2017 2016 Prior to 2016 (in millions of yen) Domestic: Corporate: Large companies: Normal obligors 9,754,935 7,343,964 7,517,546 2,710,108 2,498,507 2,978,989 8,279,869 41,083,918 37,979,353 Watch obligors excluding special attention obligors 424,745 92,446 82,206 56,363 33,737 33,847 196,544 919,888 840,289 Nonaccrual loans 142,730 55,771 41,249 20,295 11,956 29,551 136,213 437,765 343,439 Small and medium-sized Normal obligors 381,487 543,822 456,363 260,146 232,638 485,430 502,124 2,862,010 2,941,599 Watch obligors excluding special attention obligors 46,537 32,174 37,116 13,321 15,523 28,933 30,521 204,125 189,075 Nonaccrual 58,754 15,624 4,294 5,900 2,636 9,849 28,118 125,175 119,759 Retail: Housing Loan: Normal obligors 437,780 668,358 627,669 634,528 783,929 4,879,204 — 8,031,468 8,215,781 Watch obligors excluding special attention obligors 560 1,178 1,827 1,579 2,217 43,397 — 50,758 57,478 Nonaccrual 18,941 6,528 1,525 1,432 1,778 38,456 — 68,660 57,696 Others: Normal obligors 327,506 209,899 152,679 106,359 102,735 361,209 523,640 1,784,027 1,783,779 Watch obligors excluding special attention obligors 36,270 17,587 11,754 6,911 4,534 6,846 12,185 96,087 81,463 Nonaccrual 26,633 6,905 1,945 1,000 965 9,532 11,567 58,547 59,782 Sovereign Normal obligors 1,907,424 264,528 126,868 87,021 92,664 485,721 13,700 2,977,926 2,559,420 Watch obligors excluding special attention obligors 2,859 6,914 2,951 1,134 257 34 — 14,149 10,939 Nonaccrual — — — — — — — — — Banks and other financial institutions Normal obligors 15,637 155,415 261,601 26,841 85,303 74,009 187,102 805,908 790,659 Watch obligors excluding special attention obligors — — — — — — — — — Nonaccrual 167 — 180 — — — 1,600 1,947 — Total domestic 13,582,965 9,421,113 9,327,773 3,932,938 3,869,379 9,465,007 9,923,183 59,522,358 56,030,511 Foreign: Corporate: Normal obligors 10,181,936 5,813,342 3,419,918 1,298,791 804,580 1,624,422 4,630,806 27,773,795 28,555,991 Watch obligors excluding special attention obligors 172,225 43,785 47,998 37,862 15,899 35,532 84,646 437,947 336,470 Nonaccrual 41,085 25,405 12,954 5,422 8,448 21,241 43,592 158,147 135,522 Retail: Normal obligors 3,613 9,806 6,008 2,956 1,517 2,527 102 26,529 30,862 Watch obligors excluding special attention obligors 174 1,110 647 361 109 11 — 2,412 858 Nonaccrual 26 506 287 103 44 1 — 967 6 Sovereign Normal obligors 91,542 99,248 32,403 149,794 5,907 90,988 81,008 550,890 558,384 Watch obligors excluding special attention obligors — — — — — 20,124 — 20,124 19,971 Nonaccrual — 741 — — — — — 741 — Banks and other financial institutions Normal obligors 750,039 654,755 421,876 95,375 4,509 3,536 49,997 1,980,087 2,008,516 Watch obligors excluding special attention obligors 912 152 686 — — — — 1,750 78 Nonaccrual — — — — — — — — — Total foreign 11,241,552 6,648,850 3,942,777 1,590,664 841,013 1,798,382 4,890,151 30,953,389 31,646,658 Total 24,824,517 16,069,963 13,270,550 5,523,602 4,710,392 11,263,389 14,813,334 90,475,747 87,677,169 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 nonaccrual. (2) The primary component of the retail portfolio segment is housing 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) There were no significant revolving line of credit arrangements that converted to term loans during the six months ended September 30, 2020. Nonaccrual loans Loans are considered nonaccrual 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 nonaccrual 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 nonaccrual loans. Nonaccrual 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. 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 nonaccrual loans. The majority of nonaccrual loans have no contractual delinquency due to interest reductions and/or postponement of principal and interest. In March 2020, the Coronavirus, Aid, Relief, and Economic Security Act (“the CARES Act”) was approved. The CARES Act and U.S. banking agencies have among other items, provided optional, temporary relief related to accounting for certain TDRs. The temporary TDR relief is available to banks for loan modifications related to obligors who were adversely impacted by COVID-19. With regard to nonaccrual loans, 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. Nonaccrual loans are restored to accrual status, when the MHFG Group determines that the borrower poses no concerns regarding current certainty of debt fulfillment. In general, such determination is made if the borrower qualifies for an obligor rating of E2 or above and is not classified as a special attention obligor. With respect to loans restructured in a TDR, in general, such loans are restored to accrual status, when the borrower qualifies for an obligor rating of D or above. The table below presents nonaccrual loans information at March 31, 2020 and September 30, 2020: Amortized cost Nonaccrual loans with an allowance Nonaccrual loans without an allowance Total nonaccrual loans Interest income recognized (in millions of yen) March 31, 2020 Domestic: Corporate: Large companies 333,442 9,997 343,439 4,155 Small and medium-sized 102,786 16,973 119,759 1,724 Retail: Housing Loan 28,263 29,433 57,696 937 Others 36,220 23,562 59,782 846 Total domestic 500,711 79,965 580,676 7,662 Foreign: Total foreign 95,289 40,239 135,528 3,032 Total 596,000 120,204 716,204 10,694 September 30, 2020 Domestic: Corporate: Large companies 416,637 21,128 437,765 2,501 Small and medium-sized 105,556 19,619 125,175 777 Retail: Housing Loan 40,358 28,302 68,660 535 Others 36,270 22,277 58,547 373 Banks and other financial institutions 1,947 — 1,947 3 Total domestic 600,768 91,326 692,094 4,189 Foreign: Total foreign 110,295 49,560 159,855 958 Total 711,063 140,886 851,949 5,147 Notes: (1) Amounts represent the outstanding bal a (2) Amounts represent the amount of interest income on nonaccrual loans recognized on a cash basis and included in Interest income on loans in the consolidated statements of income. (3) The majority of total foreign consist of corporate. The remaining balance of nonaccrual loans that have been partially charged off, was ¥20,378 million and ¥32,783 million as of March 31, 2020 and September 30, 2020 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, 2019 and 2020: Loan forgiveness or debt to equity swaps Interest rate reduction and/or postponement of principal and/or Recorded investment (1) Charge-offs (in millions of yen) September 30, 2019 Domestic: Corporate: Large companies 689 3,806 152,373 Small and medium-sized — — 55,344 Retail: Housing Loan — — 3,742 Others — — 7,468 Total domestic 689 3,806 218,927 Foreign: Total foreign 470 4,922 38,646 Total 1,159 8,728 257,573 September 30, 2020 Domestic: Corporate: Large companies — — 264,952 Small and medium-sized — — 54,760 Retail: Housing Loan — — 14,690 Others — — 9,130 Banks and other financial institutions — — 1,600 Total domestic — — 345,132 Foreign: Total foreign — — 80,889 Total — — 426,021 Notes: (1) Amounts represent the b o (2) The majority of total foreign consist of corporate 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, 2019 and 2020 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2019 September 30, 2020 (in millions of yen) Domestic: Corporate: Large companies 5,875 2,084 Small and medium-sized 2,444 3,861 Retail: Housing Loan 686 505 Others 1,349 1,104 Total domestic 10,354 7,554 Foreign: Total foreign 6,436 43,786 Total 16,790 51,340 Age analysis of past due loans The table below presents an analysis of the age of the amortized cost basis in loans that are past due at March 31, 2020 and September 30, 2020: 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, 2020 Domestic: Corporate: Large companies 2,146 2,013 38,364 42,523 39,120,558 39,163,081 Small and medium-sized 2,347 894 9,187 12,428 3,238,005 3,250,433 Retail: Housing Loan 15,703 10,078 26,690 52,471 8,278,484 8,330,955 Others 6,179 2,013 15,239 23,431 1,901,593 1,925,024 Sovereign — — — — 2,570,359 2,570,359 Banks and other financial institutions — — — — 790,659 790,659 Total domestic 26,375 14,998 89,480 130,853 55,899,658 56,030,511 Foreign: Total foreign 1,214 181 28,722 30,117 31,616,541 31,646,658 Total 27,589 15,179 118,202 160,970 87,516,199 87,677,169 September 30, 2020 Domestic: Corporate: Large companies 311 269 38,868 39,448 42,402,123 42,441,571 Small and medium-sized 2,093 604 11,226 13,923 3,177,387 3,191,310 Retail: Housing Loan 15,831 7,870 25,922 49,623 8,101,263 8,150,886 Others 4,720 1,436 14,152 20,308 1,918,353 1,938,661 Sovereign — — — — 2,992,075 2,992,075 Banks and other financial institutions — — — — 807,855 807,855 Total domestic 22,955 10,179 90,168 123,302 59,399,056 59,522,358 Foreign: Total foreign 1,826 636 60,535 62,997 30,890,392 30,953,389 Total 24,781 10,815 150,703 186,299 90,289,448 90,475,747 Note: The majority of total foreign consist of corporate . 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 ¥60,084 million and ¥22,404 million at March 31, 2020 and September 30, 2020, respectively. |