BofA financials weekly: Japan Financial Sector

Research evidence excerpt

BofA financials weekly: Japan Financial Sector

Asset and liability management

consol. PPOP is slightly more than 1%-2%, so we view the impact as limited. AOCI: Accumulated other comprehensive income

Insurance, and other nonbanks (Natsumu Tsujino) BoJ: Bank of Japan

BRK: Berkshire Hathaway

We outline our framework for assessing 1Q progress rates in page 3. Among companies

CET1: Common equity tier 1

with full-year company guidance already disclosed, we see strong progress at JPX, T&D,

CMBS: Commercial mortgage backed securities

and ORIX, with somewhat elevated progress at Credit Saison and JPI. In Tokyo Century

(8439): Upgrade to Neutral, factoring in potential partial sale of ACG 2026-06-11we C&I: commercial and industrial

DI: Diffusion index

provide a detailed discussion of the P/L implications of a 50% sale of ACG. The range of

ESR: Economic solvency ratio

possible disposal gains is wide—from roughly breakeven to several tens of billions of

yen—making it important to be prepared for such news. While major aircraft lessors EV: Embedded value

FICC: Fixed income currencies and commodities

typically generate disposal gain margins of ~30% of book value, we think ACG’s margin

FSA: Financial Services Agency

is likely lower. In addition, partial disposals tend to involve a discount to embedded

FVTPL: Fair value through profit of loss

gains. There are factors that cannot be captured by P/E alone, such as how to treat the

order book, which has recently been expanding at ACG. Among P&C insurers, we focus MOCE: Margin over current estimate

most on Sompo HD, with a near-20% CAGR in DPS over the next few years. The current MPM: Monetary Policy Meeting

dividend yield is similar to Tokio Marine HD, leading us to highlight Sompo HD, although MTP: Medium-term plan