Mizuho Earnings: Raising Fair Value Estimate to JPY 3,310 on Higher Loan Base

We raise our fair value estimate for Mizuho Financial Group to JPY 3,310 from JPY 2,550 (to $4.24 from $3.43 per ADR) after March 2024 results that revealed a higher asset base. Our revised profit forecast is generally close to Mizuho’s target net profit of JPY 750 billion for fiscal 2024. Our raised fair value estimate places Mizuho in 3-star territory and on a price/book of 0.82 times, which we think is fair given an estimated return on equity of 7.7%. We still expect a gradual rise in Japan’s interest rates to help buffer declining global interest rates, leading to a gradual increase in Mizuho’s net interest margin. There remains debate over the pace of Japan’s interest-rate adjustment following the exit from its net-zero interest-rate policy and given the need to shore up the Japanese yen. We continue to expect the government to prefer a very gradual approach.