Loans | 4. Loans 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. The Group does not record expected credit losses for accrued interest receivables because uncollectible accrued interest is reversed through interest income in a timely manner in line with the Group’s nonaccrual and past due policies for loans. The amount of accrued interest receivables was ¥77,764 million and ¥80,959 million at March 31, 2021 and 2022, respectively and included in Accrued income. The Group does not believe that its exposure to any particular geographic area and business sector results in a significant concentration of credit risk. The table below presents the MHFG Group’s definition of obligor ratings used by MHBK and MHTB, and equivalent obligor ratings are determined for the other subsidiaries: 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. The table below pres e Term loans by origination year 2020 2019 2018 2017 2016 Prior to Revolving Loans Total (in millions of yen) 2021 Domestic: Corporate: Large companies: Normal obligors 14,351,596 6,173,182 6,884,219 2,384,565 2,105,541 2,256,613 6,819,851 40,975,567 Watch obligors excluding special attention obligors 151,406 86,390 86,199 61,785 40,907 35,681 128,363 590,731 Nonaccrual loans 219,111 196,945 38,490 129,066 28,650 9,547 194,607 816,416 Small and medium-sized Normal obligors 633,438 463,744 397,656 224,791 205,687 502,707 518,612 2,946,635 Watch obligors excluding special attention obligors 62,300 24,245 30,007 13,547 13,536 24,430 29,041 197,106 Nonaccrual loans 78,238 10,794 7,341 5,168 3,154 8,852 28,853 142,400 Retail: Housing Loan: Normal obligors 785,194 588,599 588,535 600,179 741,969 4,599,546 — 7,904,022 Watch obligors excluding special attention obligors 2,041 1,075 1,566 1,343 2,127 39,046 — 47,198 Nonaccrual loans 20,706 2,268 1,399 1,421 1,640 35,135 — 62,569 Others: Normal obligors 431,277 154,675 127,379 88,649 85,042 317,237 526,703 1,730,962 Watch obligors excluding special attention obligors 50,212 14,288 10,450 5,888 3,713 5,796 10,545 100,892 Nonaccrual loans 32,594 2,086 1,145 901 837 8,780 12,557 58,900 Sovereign: Normal obligors 1,466,468 80,260 128,702 71,943 75,389 389,777 12,615 2,225,154 Watch obligors excluding special attention obligors 4,312 3,594 2,164 635 31 — — 10,736 Nonaccrual loans — — — — — — — — Banks and other financial institutions : Normal obligors 51,874 135,135 241,418 24,097 84,244 60,281 162,622 759,671 Watch obligors excluding special attention obligors — — — — — — — — Nonaccrual loans — — — — — — — — Total domestic 18,340,767 7,937,280 8,546,670 3,613,978 3,392,467 8,293,428 8,444,369 58,568,959 Foreign: Corporate (4) : Normal obligors 12,813,813 4,614,310 2,558,432 922,526 655,823 1,143,658 4,501,155 27,209,717 Watch obligors excluding special attention obligors 196,054 36,915 72,529 54,514 894 25,009 127,553 513,468 Nonaccrual loans 61,657 29,657 12,547 3,034 4,417 17,394 14,580 143,286 Retail: Normal obligors 2,100 2,342 1,468 1,034 1,074 1,401 18 9,437 Watch obligors excluding special attention obligors — — — 14 — 13 — 27 Nonaccrual loans — — — — — — — — Sovereign: Normal obligors 96,177 78,727 26,569 157,256 — 4,474 69,320 432,523 Watch obligors excluding special attention obligors — — — — — 20,118 — 20,118 Nonaccrual loans — 710 — — — — — 710 Banks and other financial institutions : Normal obligors 1,030,080 317,635 275,695 18,272 1,497 3,105 25,145 1,671,429 Watch obligors excluding special attention obligors 6,341 — 78 — 4,774 — — 11,193 Nonaccrual loans — — — — — — — — Total foreign 14,206,222 5,080,296 2,947,318 1,156,650 668,479 1,215,172 4,737,771 30,011,908 Total 32,546,989 13,017,576 11,493,988 4,770,628 4,060,946 9,508,600 13,182,140 88,580,867 Term loans by origination year 2021 2020 2019 2018 2017 Prior to Revolving Loans Total (in millions of yen) 2022 Domestic: Corporate: Large companies: Normal obligors 12,236,438 6,640,211 5,049,408 4,535,083 1,678,591 3,378,926 7,155,041 40,673,698 Watch obligors excluding special attention obligors 145,167 69,404 71,937 66,122 40,205 50,499 127,319 570,653 Nonaccrual loans 60,525 100,975 201,375 44,919 135,777 77,602 178,416 799,589 Small and medium-sized Normal obligors 540,315 396,611 376,056 283,061 170,952 494,420 547,726 2,809,141 Watch obligors excluding special attention obligors 44,488 31,196 29,597 31,919 12,231 32,511 25,277 207,219 Nonaccrual loans 17,866 20,110 14,434 10,817 7,081 38,171 32,081 140,560 Retail: Housing Loan: Normal obligors 798,354 544,246 518,662 526,828 543,893 4,752,430 — 7,684,413 Watch obligors excluding special attention obligors 1,512 1,485 1,510 1,939 1,226 40,243 — 47,915 Nonaccrual loans 12,510 3,132 802 1,180 970 30,598 — 49,192 Others: Normal obligors 195,545 277,015 111,702 90,880 60,919 315,375 497,173 1,548,609 Watch obligors excluding special attention obligors 23,586 34,974 10,177 7,995 4,122 6,388 9,491 96,733 Nonaccrual loans 6,932 7,862 3,157 4,253 4,076 22,951 12,602 61,833 Sovereign: Normal obligors 938,534 105,966 89,385 108,664 54,580 351,876 1,864 1,650,869 Watch obligors excluding special attention obligors 3,933 4,205 859 366 113 — — 9,476 Nonaccrual loans — — — — — — — — Banks and other financial institutions : Normal obligors 45,825 23,757 131,932 211,445 3 143,717 125,078 681,757 Watch obligors excluding special attention obligors — — — — — — — — Nonaccrual loans — — — — — — — — Total dom e 15,071,530 8,261,149 6,610,993 5,925,471 2,714,739 9,735,707 8,712,068 57,031,657 Foreign: Corporate (4) : Normal obligors 14,087,409 3,571,416 3,236,191 1,392,231 550,082 1,228,924 5,906,045 29,972,298 Watch obligors excluding special attention obligors 316,387 179,555 73,656 55,876 28,325 25,384 122,410 801,593 Nonaccrual loans 35,801 1,622 13,743 17,181 14,743 22,639 9,745 115,474 Retail: Normal obligors 2,403 1,774 1,858 1,013 532 3,089 15 10,684 Watch obligors excluding special attention obligors — — 37 — — 13 — 50 Nonaccrual loans — — — — — — — — Sovereign: Normal obligors 278,373 6,856 33,225 15,194 174,298 3,079 74,923 585,948 Watch obligors excluding special attention obligors — — — — — — — — Nonaccrual loans — — 643 — — — — 643 Banks and other financial institutions : Normal obligors 1,003,709 254,232 150,505 224,571 12,041 709 120,088 1,765,855 Watch obligors excluding special attention obligors 5,544 — — — — — — 5,544 Nonaccrual loans 837 — — — — — — 837 Total foreign 15,730,463 4,015,455 3,509,858 1,706,066 780,021 1,283,837 6,233,226 33,258,926 Tota l 30,801,993 12,276,604 10,120,851 7,631,537 3,494,760 11,019,544 14,945,294 90,290,583 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 fiscal year ended March 31, 2021 and (4) Corporate of foreign includes ¥221,908 million and ¥216,463 Nonaccrual loans The MHFG Group considers loans to be nonaccrual 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 nonaccrual loans. There are no loans that are 90 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 table below presents nonaccrual loans information at March 31, 2021 and 2022: Amortized cost Interest income recognized Nonaccrual loans with an allowance Nonaccrual loans without an allowance Total nonaccrual loans (in millions of yen) 2021 Domestic: Corporate: Large companies 800,329 16,087 816,416 13,050 Small and medium-sized 121,031 21,369 142,400 1,759 Retail: Housing Loan 37,006 25,563 62,569 1,073 Others 37,884 21,016 58,900 806 Total domestic 996,250 84,035 1,080,285 16,688 Foreign: Total foreign 117,300 26,696 143,996 2,422 Total 1,113,550 110,731 1,224,281 19,110 2022 Domestic: Corporate: Large companies 783,305 16,284 799,589 9,426 Small and medium-sized 121,598 18,962 140,560 1,700 Retail: Housing Loan 26,812 22,380 49,192 946 Others 40,155 21,678 61,833 819 Total domestic 971,870 79,304 1,051,174 12,891 Foreign: Total foreign 110,284 6,670 116,954 1,469 Total 1,082,154 85,974 1,168,128 14,360 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 nonaccrual loans. (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 ¥20,197 million and ¥13,046 million as of March 31, 2021 and 2022, 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, 2021 and 2022: Loan forgiveness or debt to equity swaps Interest rate reduction and/or postponement of principal and/or interest Recorded investment (1) Charge-offs (in millions of yen) 2021 Domestic: Corpora t Large companies — 160 597,281 Small and medium-sized — — 120,798 Retail: Housing Loan — — 21,548 Others — — 20,604 Banks and other financial institutions — — 3,200 Total domestic — 160 763,431 Foreign: Total foreign 2,614 4,385 163,149 Total 2,614 4,545 926,580 2022 Domestic: Corporate: Large companies 5,849 22,757 612,569 Small and medium-sized — — 125,103 Retail: Housing Loan — — 7,897 Others — — 21,749 Total domestic 5,849 22,757 767,318 Foreign: Total foreign — — 62,651 Total 5,849 22,757 829,969 Notes: (1) Amounts represent the book values of loans immediately after the restructurings. (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 fiscal years ended March 31, 2021 and 2022 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment 2021 2022 (in millions of yen) Domestic: Corporate: Large companies 10,590 7,831 Small and medium-sized 5,603 2,777 Retail: Housing Loan 810 938 Others 2,133 1,000 Total domestic 19,136 12,546 Foreign: Total foreign 47,239 14,126 Total 66,375 26,672 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, 2021 and 2022: 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) 2021 Domestic: Corporate: Large companies 1,275 4,607 27,387 33,269 42,349,445 42,382,714 Small and medium-sized 1,386 — 9,185 10,571 3,275,570 3,286,141 Retail: Housing Loan 9,776 7,102 21,257 38,135 7,975,654 8,013,789 Others 5,165 1,123 12,012 18,300 1,872,454 1,890,754 Sovereign — — — — 2,235,890 2,235,890 Banks and other financial institutions — — — — 759,671 759,671 Total domestic 17,602 12,832 69,841 100,275 58,468,684 58,568,959 Foreign: Total foreign — 7,477 30,795 38,272 29,973,636 30,011,908 Total 17,602 20,309 100,636 138,547 88,442,320 88,580,867 2022 Domestic: Corporate: Large companies 323 291 27,275 27,889 42,016,051 42,043,940 Small and medium-sized 693 641 10,370 11,704 3,145,216 3,156,920 Retail: Housing Loan 15,181 8,326 16,548 40,055 7,741,465 7,781,520 Others 4,454 1,068 11,009 16,531 1,690,644 1,707,175 Sovereign — — — — 1,660,345 1,660,345 Banks and other financial institutions — — — — 681,757 681,757 Total domestic 20,651 10,326 65,202 96,179 56,935,478 57,031,657 Foreign: Total foreign — — 28,816 28,816 33,230,110 33,258,926 Total 20,651 10,326 94,018 124,995 90,165,588 90,290,583 Note: The majority of total foreign consist of corporate. Collateral Dependent Loans The MHFG Group uses, as a practical expedient, the fair value of the collateral when recording the net carrying amounts of loans and determining the allowance for credit losses of such loans, for which the repayment is expected to be provided substantially through the operation or sale of the collateral, when the borrower is experiencing financial difficulty based on the assessment as of the reporting date. As of March 31, 2022, collateral relating to these loans was primarily comprised of real estate. There were no significant changes in the extent to which collateral secures these loans during this fiscal year and no significant concentration of collateral against any portfolio segment. Net losses on sales of loans were ¥ 1,036 million, ¥ 8,172 million and ¥3,080 million for the fiscal years ended March 31, 2020, 2021 and 2022, respectively. These net losses include unrealized gains and losses on loans held for sale, representing the adjustments to the lower of cost or fair value at the end of each reporting period. The gains and losses on sales of loans are recorded in Other noninterest income and expenses, respectively. |