Japan Financial Sector: BofA financials weekly, 17 July 2026

Research evidence excerpt

Japan Financial Sector: BofA financials weekly, 17 July 2026

Banks

Bank stocks corrected on Friday but strengthened in July, creating some sense

of overheating

Bank stocks continued to perform well through Thursday this week, creating a sense of

overheating, but corrected to some extent in Friday’s sharp equity market decline.

However, considering that bank stock outperformance in July was stronger than

expected, even if 1Q NP progress slightly exceeds consensus, it is unlikely to be

interpreted as a positive catalyst. There are few clear positive catalysts in August-

September, and upside could remain heavy until additional BoJ rate hikes from October

onward (October 30 monetary policy meeting) and 1H results (mid-November: upward

revisions to full-year guidance / enhancement of returns, and a shift in focus to FY3/28)

approach. However, earnings themselves remain strong, considering continued BoJ rate

hikes and upside in loan balance growth / capital markets businesses, and our stance of

being “bullish on Japanese bank stocks over the medium term / viewing major banks as

promising versus regional banks” is unchanged, based on FY3/28 ROE (slightly above

13% for megabanks / Resona, assuming a policy rate of 1.5%).

1Q results (Exhibit 34 / Exhibit 35): Focus on whether results exceed our

conservative forecasts

For FY3/27 1Q, we forecast pre-provision operating profit progress rates versus full-year

guidance of 21-26% for major banks and 17-37% for regional banks. In our earnings

forecasts, we assume (1) upside in net interest income accompanying the BoJ rate hike

at the June monetary policy meeting will contribute from 2Q results onward, (2) fee

income will progress in line with a normal 1Q level (in many cases, profits expand from