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 ¥80,959 million and ¥145,845 million at March 31, 2022 and September 30, 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 presents credit quality information of loans based on the MHFG Group’s internal rating system at March 31, 2022 and September 30, 2022: March 31, 2022 Term loans by origination year Revolving Loans Total 2021 2020 2019 2018 2017 Prior to 2017 (in millions of yen) 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 domestic 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 Total 30,801,993 12,276,604 10,120,851 7,631,537 3,494,760 11,019,544 14,945,294 90,290,583 September 30, 2022 Term loans by origination year Revolving Loans Total 2022 2021 2020 2019 2018 Prior to 2018 (in millions of yen) Domestic: Corporate: Large companies: Normal obligors 7,870,700 7,071,371 5,977,206 4,621,144 3,938,164 4,418,492 7,791,782 41,688,859 Watch obligors excluding special attention obligors 65,982 73,932 63,547 84,634 68,093 74,857 129,011 560,056 Nonaccrual loans 78,466 56,229 71,920 121,977 38,086 133,924 174,556 675,158 Small and medium-sized Normal obligors 310,377 372,070 329,472 310,103 266,522 649,254 505,667 2,743,465 Watch obligors excluding special attention obligors 29,976 24,222 27,907 20,911 21,311 36,433 21,800 182,560 Nonaccrual loans 23,808 14,072 17,798 8,410 8,240 30,351 29,840 132,519 Retail: Housing Loan: Normal obligors 420,132 634,709 506,226 491,602 501,271 5,003,449 — 7,557,389 Watch obligors excluding special attention obligors 406 1,740 1,336 1,111 1,516 35,357 — 41,466 Nonaccrual loans 5,956 4,636 1,956 827 1,015 28,836 — 43,226 Others: Normal obligors 119,310 116,244 254,202 95,347 78,029 335,135 488,953 1,487,220 Watch obligors excluding special attention obligors 14,027 11,090 28,236 7,497 5,246 7,230 8,067 81,393 Nonaccrual loans 8,083 4,745 7,379 2,615 3,411 22,147 10,802 59,182 Sovereign: Normal obligors 950,117 190,195 103,654 94,458 98,581 367,373 — 1,804,378 Watch obligors excluding special attention obligors 4,517 2,538 3,464 321 291 — — 11,131 Nonaccrual loans — — — — — — — — Banks and other financial institutions: Normal obligors 74,820 17,641 23,286 136,043 244,377 143,685 133,705 773,557 Watch obligors excluding special attention obligors — — — — — — — — Nonaccrual loans — — — — — — — — Total domestic 9,976,677 8,595,434 7,417,589 5,997,000 5,274,153 11,286,523 9,294,183 57,841,559 Foreign: Corporate (4) Normal obligors 13,959,808 5,923,058 3,131,452 3,045,313 1,334,469 1,655,488 7,228,807 36,278,395 Watch obligors excluding special attention obligors 227,650 131,936 184,554 74,298 47,282 55,384 120,772 841,876 Nonaccrual loans 5,563 35,354 14,106 51,952 14,308 38,660 9,983 169,926 Retail: Normal obligors 1,221 1,868 1,733 1,850 941 3,278 13 10,904 Watch obligors excluding special attention obligors — — — — — 24 — 24 Nonaccrual loans — — — — — — — — Sovereign: Normal obligors 120,147 260,281 10,594 35,025 11,735 209,034 78,650 725,466 Watch obligors excluding special attention obligors — — — — — — — — Nonaccrual loans — — — 676 — — — 676 Banks and other financial institutions: Normal obligors 1,371,469 439,563 118,506 129,568 29,016 14,155 323,374 2,425,651 Watch obligors excluding special attention obligors 8,912 8,345 8,082 14,475 — — — 39,814 Nonaccrual loans — — — — — — — — Total foreign 15,694,770 6,800,405 3,469,027 3,353,157 1,437,751 1,976,023 7,761,599 40,492,732 Total 25,671,447 15,395,839 10,886,616 9,350,157 6,711,904 13,262,546 17,055,782 98,334,291 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, 2022 and the six months ended September 30, 2022. (4) Corporate of foreign include d we 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. The 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 September 30, 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 period and no significant concentration of collateral against any portfolio segment. 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 payments 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, “Receivables” (“ASC 310”). 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 majority of nonaccrual loans have no contractual delinquency due to interest reductions and/or postponement of principal and interest. In case loans are designated as 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 collectability 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 loans and 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 loans, and accrual status, when the borrower qualifies for an obligor rating of D or above. The table below presents nonaccrual loans information at March 31, 2022 and September 30, 2022: March 31, 2022 September 30, Amortized cost (1) Nonaccrual loans with an allowance Nonaccrual loans without an allowance Total nonaccrual loans Interest income recognized (2) (in millions of yen) Domestic: Corporate: Large companies 783,305 16,284 799,589 6,787 Small and medium-sized 121,598 18,962 140,560 867 Retail: Housing Loan 26,812 22,380 49,192 477 Others 40,155 21,678 61,833 406 Total domestic 971,870 79,304 1,051,174 8,537 Foreign: Total foreign 110,284 6,670 116,954 843 Total 1,082,154 85,974 1,168,128 9,380 September 30, 2022 September 30, Amortized cost (1) Nonaccrual loans with an allowance Nonaccrual loans without an allowance Total nonaccrual loans Interest income recognized (2) (in millions of yen) Domestic: Corporate: Large companies 657,323 17,835 675,158 10,009 Small and medium-sized companies 114,001 18,518 132,519 803 Retail: Housing Loan 23,491 19,735 43,226 399 Others 38,446 20,736 59,182 377 Total domestic 833,261 76,824 910,085 11,588 Foreign: Total foreign 162,601 8,001 170,602 1,572 Total 995,862 84,825 1,080,687 13,160 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 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, 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) September 30, 2021 Domestic: Corporate: Large companies 5,849 22,757 375,248 Small and medium-sized — — 60,856 Retail: Housing Loan — — 4,996 Others — — 10,288 Total domestic 5,849 22,757 451,388 Foreign: Total foreign — — 21,206 Total 5,849 22,757 472,594 September 30, 2022 Domestic: Corporate: Large companies — 140,371 256,773 Small and medium-sized — — 55,424 Retail: Housing Loan — — 3,257 Others — — 9,557 Total domestic — 140,371 325,011 Foreign: Total foreign — — 20,779 Total — 140,371 345,790 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 six months ended September 30, 2021 and 2022 with respect to the loans modified as TDRs within the previous twelve months: Recorded investment September 30, 2021 September 30, 2022 (in millions of yen) Domestic: Corporate: Large companies 1,148 91,049 Small and medium-sized 2,157 626 Retail: Housing Loan 579 418 Others 515 722 Total domestic 4,399 92,815 Foreign: Total foreign 14,125 — Total 18,524 92,815 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, 2022 and September 30, 2022: 30-59 days past due 60-89 days past due 90 days or more past Total past due Current Total (in millions of yen) March 31, 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 September 30, 2022 Domestic: Corporate: Large companies 972 — 33,164 34,136 42,889,937 42,924,073 Small and medium-sized 809 — 11,330 12,139 3,046,405 3,058,544 Retail: Housing Loan 14,486 6,026 16,024 36,536 7,605,545 7,642,081 Others 4,582 1,030 11,130 16,742 1,611,053 1,627,795 Sovereign — — — — 1,815,509 1,815,509 Banks and other financial institutions — — — — 773,557 773,557 Total domestic 20,849 7,056 71,648 99,553 57,742,006 57,841,559 Foreign: Total foreign — — 49,946 49,946 40,442,786 40,492,732 Total 20,849 7,056 121,594 149,499 98,184,792 98,334,291 Note: The majority of total foreign consist of corporate. Net losses on sales of loans Net losses on sales of l o at of respectively. |