Weak Yen Helps Japan's Banks Track Full-Year Guidance Despite Bond Losses; We Like SMFG and SMTH

We maintain our fair value estimates for Sumitomo Mitsui Financial Group, or SMFG, Mizuho Financial Group, Sumitomo Mitsui Trust Holdings, or SMTH, and Resona Holdings after they reported results for the April-June quarter. We also maintain our fair value estimate for Mitsubishi UFJ Financial Group, or MUFG, which won’t report its results until Tuesday, but its bottom-line figure was previewed ahead of the company announcement by Japan’s Nikkei newspaper on Saturday. There is: 24% upside from Friday’s closing price for SMFG based on our fair value estimate of 0.57 times book; 18% upside for SMTH based on our fair value estimate of 0.70 times book; 15% upside for MUFG based on our fair value estimate of 0.64 times book; 11% upside for Mizuho based on our fair value estimate of 0.50 times book; and just 3% upside for Resona based on our fair value estimate of 0.53 times book, making SMFG and SMTH our top picks, followed by MUFG.