Mizuho will cut 3,000 jobs as Japanese banks battle weak demand for credit at home and a tough global growth environment, which saw half-year profits at the lender and smaller rival Sumitomo Mitsui fall by a quarter.
Mizuho Financial Group said it plans to axe the jobs, about 5 percent of its workforce, by March 2016 through merging its corporate and retail banking units. First-half profits at Japan's No. 2 lender by assets slid, as the previous year's bond trading gains slowed.
Third-ranked Sumitomo Mitsui Financial Group (SMFG), whose profits also fell 25 percent, said it will buy back up to 50 billion yen ($649 million) worth of its shares, or 1.63 percent of its outstanding stock.
Profitability in their core business in Japan is still looking weak, with fee income from various businesses, such as sales of investment trusts and insurance products, remaining low, Chikako Horiuchi, analyst at Fitch Ratings in Tokyo, said about Mizuho and SMFG.
Their brokerage units are also facing tough times. So the point is whether they can boost their overseas business or not.
Japan's economic outlook is clouded by a strong yen and weak global demand, and growth is likely to slow after rebounding in the third quarter from an earthquake-triggered recession.
Economists polled by Reuters earlier this month saw Japan's economic growth slowing to 0.5 percent this quarter.
Some said the economy may even shrink again as floods in Thailand -- a major production base for Japanese manufacturers -- disrupt production and as emerging economies cool.
Japanese bank lending fell 22 straight months to September, Bank of Japan data shows. The decline stopped in October, but major banks continued to see a drop, and the grim environment has already taken a toll on the nation's financial industry.
Japan's top brokerage Nomura is cutting more than 700 jobs, on top of the 300 it announced in September. No. 2 brokerage Daiwa Securities Group is axing more than 300 overseas jobs.
And a Japanese securities joint venture between Mitsubishi UFJ Financial Group, the top-ranked lender, and Morgan Stanley plans to cut 1,200-1,300 jobs, roughly a fifth of its workforce, a source familiar with the matter said last month.
The pain has not been confined just to Japan.
Bank of America, HSBC and Goldman Sachs are among global financial institutions shedding thousands of jobs.
Reflecting concerns on growth and upcoming capital requirements, Japanese bank shares have been big market underperformers this year. MUFG shares are down 24 percent, Mizuho off 33 percent and SMFG down 29 percent compared with a 16 percent drop in the main Nikkei index.
While first-half profit fell 25 percent at Mizuho and SMFG, MUFG's profit jumped 95 percent, boosted by a hefty one-off gain from converting preferred shares in Morgan Stanley, in which it now holds a 22 percent stake.
The banks' profits were cushioned by lower provisions for bad loans and relatively solid bond trading gains. They also have only limited exposure to Europe's sovereign debt crisis.
MUFG and SMFG, as expected by some analysts, raised their full-year profit forecasts, while Mizuho kept its forecast.
The Japanese banks appeared to take a wait-and-see approach on scandal-hit Olympus Corp.
SMFG said it had been invited to a November 16 meeting with Olympus, and would consider necessary support for the troubled camera maker after examining an independent committee's report due early next month. MUFG said it would also wait for the report before deciding its course of action.
Mizuho said action would be needed if the maker of medical devices and cameras is found to have used loans for purposes other than those agreed.
($1 = 77.070 Japanese Yen)
(Additional reporting by Junko Fujita; Writing by Muralikumar Anantharaman; Editing by Ian Geoghegan)