The bank’s total funding margin, the spread between income on loans or securities investments and funding costs, and a key gauge of profitability, was steady at 0.27 percent in fiscal 2017 compared to 0.26 percent the previous year, according to financial statements.
However, the interest margin from loans has fallen to 1.14 percent from 1.26 percent in three years. Shibata said the bank expects it to fall to around 1.11 percent in the first half of the fiscal year before steadying.
Yen Bonds
Treasuries are not the only securities Shizuoka is wary of this year. The bank doesn’t plan to actively boost its yen bond holdings, rather keep them close to last year’s level of around 600 billion yen.
“Yen bonds are not attractive in terms of carry income or yield levels,” Shibata said. “But there is a need for owning government bonds as collateral at the BOJ or as a risk hedge for stocks. We are keeping a minimum and reallocating some from redemptions.”
This article was provided by Bloomberg News.