Form 6-K

0001193125-16-437345.txt : 20160126 0001193125-16-437345.hdr.sgml : 20160126 20160126061743 ACCESSION NUMBER: 0001193125-16-437345 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20160126 FILED AS OF DATE: 20160126 DATE AS OF CHANGE: 20160126 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIZUHO FINANCIAL GROUP INC CENTRAL INDEX KEY: 0001335730 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33098 FILM NUMBER: 161359930 BUSINESS ADDRESS: STREET 1: 1-5-5, OTEMACHI CITY: CHIYODA-KU, TOKYO STATE: M0 ZIP: 100-8176 BUSINESS PHONE: 81-3-5224-1111 MAIL ADDRESS: STREET 1: 1-5-5, OTEMACHI CITY: CHIYODA-KU, TOKYO STATE: M0 ZIP: 100-8176 6-K 1 d110553d6k.htm FORM 6-K Form 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of January 2016

Commission File Number 001-33098

Mizuho Financial Group, Inc.

(Translation of registrant’s name into English)

5-5, Otemachi 1-chome

Chiyoda-ku, Tokyo 100-8176

Japan

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Date:		January 26, 2016

Mizuho Financial Group, Inc.

By:		/s/ Yasuhiro Sato
Name:		Yasuhiro Sato
Title:		President & CEO

Unless otherwise specified, for purposes of this report, we have presented our financial information in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.

Table of Contents


	Page
Recent Developments		2
Accounting Changes		8
Operating Results		8
Business Segments Analysis		14
Financial Condition		17
Liquidity		25
Capital Adequacy		27
Off-balance-sheet Arrangements		32

Consolidated Balance Sheets (Unaudited)		F-1
Consolidated Statements of Income (Unaudited)		F-3
Consolidated Statements of Comprehensive Income (Unaudited)		F-4
Consolidated Statements of Equity (Unaudited)		F-5
Consolidated Statements of Cash Flows (Unaudited)		F-6
Notes to Consolidated Financial Statements (Unaudited)		F-7

Recent Developments

The following is a summary of significant business developments since March 31, 2015 relating to Mizuho Financial Group, Inc.

Operating Environment

As to the recent economic environment, the gradual recovery in the global economy has continued, although weaknesses in the recovery have been seen in some regions. This recovery is expected to continue particularly in the major industrialized countries, but it remains necessary to monitor increasing geopolitical risks, the economic outlook for China and emerging countries and the effect of the decline in crude oil prices. In the United States, although some adverse effects were recognized due partly to the strong U.S. dollar, low crude oil prices and weakened overseas economies, the economy continued to recover as employment conditions improved and domestic demand expanded. In December 2015, the Federal Open Market Committee decided to raise the target range for the federal funds rate to 0.25-0.5%. The Committee also announced that “the stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2% inflation.” It is expected that the steady recovery in the economy will continue, while the movement toward normalizing monetary policy, which would be particularly influenced by financial markets and overseas economies, requires continued monitoring. In Europe, the economies in the Euro area continued to recover gradually, in addition to steady recovery in the United Kingdom. Although it is expected that the economies of the region will continue to follow a track to recovery, the effect of the consequence of debt problems (including developments in Greece), the effect of the slowdown of the economies in emerging countries and conflicts in Ukraine, and trends in monetary policy require continued monitoring. In Asia, overall economic growth lacked momentum, due partly to the weakening in exports. In the coming year, it is expected that growth of the regional economy will remain gradual fueled in part by the increase in regional demand supported by low crude oil prices. However, the interest rate increase in the United States could result in capital withdrawal from the region and weakening currencies and lead to monetary policy tightening, which could lead to a further slowdown in the regional economy. In addition, the political situation in certain regions also requires monitoring. In China, although the economy continued to grow, the pace of economic growth was significantly slower. The Chinese government itself described the current situation of China’s economy as the “New Normal,” under which it is expected to continue to grow at a medium to high rate. However, the possibility of a further slowdown in growth is causing concern due mainly to issues such as excess equipment in the manufacturing sector and weakness in the real estate market. Such concerns have led to significant recent volatility in Chinese equity markets, which have also impacted various other markets worldwide. In Japan, although there were improvements in private consumption backed by employment conditions and corporate earnings, the Japanese economy has been in a “leveling off” phase, in part because exports are in a weak tone. As for the future outlook of the Japanese economy, it is expected to generally continue on its recovery path, supported by such factors as growth in consumer spending backed by a recovery in employee wages and the benefits of low crude oil prices. However, the risk of a slowdown in overseas economies, especially in China and emerging countries, continues to require monitoring. Key indicators of economic conditions in recent periods include the following:

•

Japan’s real gross domestic product on a quarterly basis, compared to the corresponding period of the previous year, decreased by 1.1% in the first quarter of calendar 2015. However, after continuing to decrease from the second quarter of calendar 2014 through the first quarter of calendar 2015, it increased by 0.7% and 1.6% in the second and third quarters of calendar 2015, respectively.

•

The Japanese government has been stating in its monthly economic reports that “the Japanese economy is on a moderate recovery,” while noting that “improvement can be seen in corporate sector” in April 2015, that “variation in tempo of improvement can be seen in some areas” in August 2015, that “slowness can be seen in some areas” in September 2015 and that “weakness can be seen in some areas” from October 2015 through January 2016. The report in January 2016 also generally repeated recent observations, noting that “private consumption holds firm as a whole,” “business investment is almost flat,” “industrial production is flat recently,” “corporate profits are improving,” “firms’ judgment on current business conditions is almost flat, while cautiousness can be seen in some areas,”

“the employment situation is improving” and “consumer prices (excluding fresh food, petroleum products and other specific components) are rising moderately,” and also noting that “exports are in a weak tone.”

•

In January 2013, the Bank of Japan announced that it would set a “price stability target” at 2% in terms of the year-on-year rate of change in the consumer price index and introduced the “open-ended asset purchasing method” under the asset purchase program, pursuant to which financial assets will be purchased on a monthly basis without setting any termination date, for the purpose of taking additional steps to provide monetary accommodation decisively. Furthermore, the Japanese government and the Bank of Japan released a joint statement that they would strengthen their policy coordination and work together in order to overcome deflation early and achieve sustainable economic growth with price stability. In April 2013, the Bank of Japan announced that it would introduce the “quantitative and qualitative monetary easing” to enter a new phase of monetary easing and that it would continue with the easing which aims to achieve the price stability target of 2% until that target is maintained in a stable manner. Under the easing, the Bank of Japan changed the main operating target for money market operations from the uncollateralized overnight call rate to the monetary base, and announced that it would double the monetary base and the amounts outstanding of Japanese government bonds as well as exchange-traded funds (“ETFs”) in two years and more than double the average remaining maturity of Japanese government bonds purchases. In October 2014, for the purpose of pre-empting manifestation of the risk that the conversion of deflationary mindsets might be delayed and maintaining the improving momentum of expectation formation, the Bank of Japan announced that it would expand the “quantitative and qualitative monetary easing.” In particular, the Bank of Japan also announced that it would expand the monetary base to be increased at an annual pace of about ¥80 trillion (an addition of about ¥10-20 trillion compared with the past). Moreover, the Bank of Japan announced that it would expand the purchases of the Japanese government bonds to be increased at an annual pace of about ¥80 trillion (an addition of about ¥30 trillion compared with the past) and expand the purchases of ETFs and Japan real estate investment trusts so that their amounts outstanding would be increased at an annual pace of ¥3 trillion (tripled compared with the previously announced amount) and ¥90 billion (tripled compared with the previously announced amount), respectively. Additionally, the Bank of Japan announced it would make ETFs that track the JPX-Nikkei Index 400 eligible for purchase. In December 2015, the Bank of Japan decided to adopt supplementary measures for “quantitative and qualitative monetary easing.” The Bank of Japan decided to establish a new program for purchasing ETFs at an annual pace of about ¥300 billion, in addition to the current program of ETF purchases described above. Under this new program, the Bank of Japan will purchase ETFs composed of stocks issued by firms that are proactively making investment in physical and human capital. The Bank of Japan also announced to extend the average remaining maturity of Japanese government bonds that it purchases from about 7 to 10 years to about 7 to 12 years in order to facilitate the flexible and smooth purchase of Japanese government bonds considering that the gross amount of its Japanese government bond purchases is expected to increase.

•

The yield on newly issued 10-year Japanese government bonds was 0.405% as of March 31, 2015 and decreased to 0.356% as of September 30, 2015. Thereafter, the yield further decreased to 0.265% as of December 30, 2015.

•

The Nikkei Stock Average, which is an index based on the average of the price of 225 stocks listed on the Tokyo Stock Exchange, decreased by 9.5% to ¥17,388.15 as of September 30, 2015 compared to March 31, 2015. Thereafter, the Nikkei Stock Average increased to ¥19,033.71 as of December 30, 2015.

•

According to Teikoku Databank, a Japanese research institution, there were 4,217 corporate bankruptcies in Japan in the six months ended September 30, 2015, involving approximately ¥0.8 trillion in total liabilities, 4,294 corporate bankruptcies in the six months ended March 31, 2015, involving approximately ¥1.0 trillion in total liabilities, and 4,750 corporate bankruptcies in the six months ended September 30, 2014, involving approximately ¥0.9 trillion in total liabilities.

•

The yen to U.S. dollar spot exchange rate, according to the Bank of Japan, was ¥120.21 to $1.00 as of March 31, 2015 and strengthened to ¥120.03 to $1.00 as of September 30, 2015. Thereafter, the yen weakened to ¥120.42 to $1.00 as of December 30, 2015.

Developments Relating to Our Capital

All yen figures and percentages in this subsection are truncated.

We have been implementing disciplined capital management by pursuing the optimal balance between strengthening of stable capital base and steady returns to shareholders as described below.

In the six months ended September 30, 2015, we strengthened our capital base mainly as a result of earning ¥384.1 billion of profit attributable to owners of parent (under Japanese GAAP).

With respect to redemptions of previously issued securities, we have redeemed various securities that are eligible Tier1/Tier2 capital instruments subject to phase-out arrangements under Basel III upon their respective initial optional redemption dates or their respective maturity dates. With respect to Tier 1 capital, in June 2015, we redeemed ¥355.0 billion, ¥72.5 billion and ¥25.0 billion of non-dilutive Tier 1 preferred securities issued by our overseas special purpose companies in December 2008, August 2009 and September 2009, respectively. With respect to Tier 2 capital, in December 2015, we redeemed ¥30.0 billion of dated subordinated bonds issued by our subsidiary bank.

With respect to new issuances, in June 2015, we issued ¥50.0 billion of dated subordinated bonds with a write-down feature that are Basel III-eligible Tier 2 capital instruments through public offerings to wholesale investors in Japan. In July 2015, we issued ¥300.0 billion of perpetual subordinated bonds with optional-redemption clause and write-down clause that are Basel III-eligible Additional Tier 1 capital instruments to qualified institutional investors in Japan. In October 2015, we issued $750.0 million of dated subordinated bonds with a write-down feature that are Basel III-eligible Tier 2 capital instruments to overseas wholesale investors.

Our Common Equity Tier 1 capital ratio under Basel III as of September 30, 2015 was 10.17%. We aim to strengthen our capital base, by March 31, 2016, to the level that enables us to stably secure our Common Equity Tier 1 capital ratio under Basel III of 8% or higher (on a fully-effective basis and including the outstanding balance of the eleventh series class XI preferred stock, which was ¥144.0 billion as of September 30, 2015, that will become mandatorily converted into common stock, and will thus be fully recognized as Common Equity Tier 1 capital, by July 2016). We believe that we will be able to secure a sufficient Common Equity Tier 1 capital ratio under Basel III as of March 31, 2019 when it becomes fully effective pursuant to its phase-in implementation. The foregoing target is based on capital regulations that have been announced to date. See “—Capital Adequacy” for information regarding the capital regulations to which we are subject.

The foregoing statements include forward-looking statements and are subject to risks, uncertainties and assumptions. See “Forward-looking Statements” and “Item 3.D. Key Information—Risk Factors” in our most recent Form 20-F filed with the U.S. Securities and Exchange Commission.

We paid an interim cash dividend with respect to the fiscal year ending March 31, 2016 of ¥3.75 per share of common stock, which was an increase of ¥0.25 per share as the interim cash dividend paid in the previous fiscal year.

Developments Relating to Our Business

Four Key Focus Areas

We are strengthening profitability by further developing collaboration among banking, trust and securities functions as well as through selection and concentration:

•

Establishing competitive edge for large corporate customers

•

Expanding market share for super large corporate customers

•

Enhancing business promotional capability by reorganizing coverage sections at Mizuho Securities Co., Ltd.

•

Acquiring mandates for large cross-border M&A transactions

•

Enhancing integrated approach to both small and medium enterprises (“SMEs”) and their owners

•

Fully applying our integrated approach to both SMEs and their owners of upper-tier medium-sized companies

•

Strengthening integrated approach among banking, trust and securities functions to high-net-worth business/land owners

•

Strengthening business promotion to private companies in Tokyo Metropolitan area

•

Development of Super 30 Strategy

•

Accelerating the improvement of relationship tier status with Super 50 customers

•

Strengthening the industry sector focused approach

•

Strengthening the integrated management between banking and securities functions and capturing related business

•

Making asset management the “Fourth Pillar” of our business

•

Promoting integration of the group-wide asset management functions

•

Strengthening capabilities to respond to customer needs

Others

Exposure to Certain European Countries (GIIPS)

In Europe, fiscal problems in certain countries, including Greece, Ireland, Italy, Portugal and Spain, have affected the financial system and the real economy, and the uncertainty concerning European economic activity continues to present a risk of a downturn in the world economy. As of September 30, 2015, our exposure to obligors in such countries was not significant. Specifically, our principal banking subsidiaries (including their overseas subsidiaries) had a total of approximately $6.1 billion in exposure to obligors in such countries. The breakdown by country and by type of obligor is as follows:


	As of
	March 31, 2015		September 30, 2015		Increase (decrease)
	(in billions of US dollars)
Greece	$	—	$	—	$	—
Sovereign		—		—		—
Financial Institutions		—		—		—
Others		—		—		—
Ireland		1.5		1.0		(0.5	)
Sovereign		—		—		—
Financial Institutions		—		0.1		0.1
Others		1.5		0.9		(0.6	)
Italy		1.9		2.2		0.3
Sovereign		0.5		0.4		(0.1	)
Financial Institutions		—		0.1		0.1
Others		1.4		1.7		0.3
Portugal		0.3		0.3		—
Sovereign		—		—		—
Financial Institutions		—		—		—
Others		0.3		0.3		—
Spain		2.7		2.6		(0.1	)
Sovereign		0.1		—		(0.1	)
Financial Institutions		0.2		0.1		(0.1	)
Others		2.4		2.5		0.1
Total	$	6.4	$	6.1	$	(0.3	)
Sovereign		0.6		0.4		(0.2	)
Financial Institutions		0.2		0.3		0.1
Others		5.6		5.4		(0.2	)

Notes:

(1)

Figures in the above table are on a managerial accounting basis. The difference between the exposure based on U.S. GAAP and that based on managerial accounting is attributable mainly to the netting of derivatives exposure as described in footnote 2 below and does not have a material impact on total exposure amounts set forth in the above table.

(2)	Figures in the above table represent gross exposure except for derivatives exposure which takes into consideration legally enforceable master netting agreements.

Exposure to Russia and Ukraine

As for our exposure to obligors in Russia, our principal banking subsidiaries (including their overseas subsidiaries) had a total of approximately $3.5 billion in exposure as of March 31, 2015, which decreased to $3.1 billion as of September 30, 2015. Our principal banking subsidiaries (including their overseas subsidiaries)

had almost zero exposure to obligors in Ukraine as of March 31, 2015 and September 30, 2015. The exposure amounts are on a managerial accounting basis, and footnotes 1 and 2 to the table immediately above are similarly applicable to these amounts.

Enhancing of Corporate Governance

In June 2015, we filed our “Corporate Governance Report,” which describes our actions in response to the Corporate Governance Code, with the Tokyo Stock Exchange. After considering each principle of the code based on our intent and spirit, we have decided to comply with all of the principles.

The report discloses our policy regarding cross-holdings of shares of other listed companies and our standards for the exercise of voting rights associated with cross-shareholdings. We and our core subsidiaries (Mizuho Bank, Ltd., Mizuho Trust & Banking Co., Ltd. and Mizuho Securities) set out our basic policy in the report. This policy states that unless we consider these holdings to be meaningful, we will not hold the shares of other companies as cross-shareholdings. This reflects factors including the changes in the environment surrounding corporate governance and the potential impact on our financial position associated with stock market volatility risk. Our considerations of whether such holdings are meaningful will include perspectives such as growth potential, outlook, or revitalization as well as the results of studies on present and future economic feasibility and profitability. Further, we will actively exercise voting rights through constructive dialogue with our customers.

In accordance with our policy regarding cross-holdings and standards for the exercise of voting rights, we will continue to improve the corporate value of both us and our customers over the medium to long term through constructive dialogue with our customers based on relationships of trust and the exercise of voting rights.

Enhancing Collaboration with Orient Corporation

In July 2015, we announced that we and Mizuho Bank will further enhance collaboration with Orient Corporation (“Orico”), our equity method affiliate, in order to meet diversified customer needs with group-wide comprehensive financial services. In connection with the foregoing, we increased our voting rights ratio in Orico from approximately 22% currently to 49%. Orico continues to be an equity method affiliate of ours after the increase.

Strengthening Our Asset Management Business

In order to make asset management the “Fourth Pillar” of our business, we have been promoting the integration of group-wide asset management functions and strengthening capabilities to respond to customer needs. In September 2015, we and The Dai-ichi Life Insurance Company, Limited announced our agreement on integrating the asset management functions of both groups and jointly operating the resulting new company in accordance with the spirit of equal partnership under the comprehensive business alliance between the two companies. With a view to enhancing asset management functions, in September 2015, we agreed to enter into a strategic capital and business alliance with Matthews International Capital Management LLC. In October 2015, we in cooperation with BlackRock Asset Management North Asia Limited launched “BlackRock Japan Multi-Income Equity Fund” in Hong Kong based on the business alliance between BlackRock, Inc. and us. Moreover, in October 2015, Mizuho Trust & Banking announced that it entered into an agreement with Hulic Co., Ltd. (“Hulic”) to acquire the entire issued shares of Simplex Real Estate Management Inc. and Simplex REIT Partners Inc. from Hulic.

Japanese Tax Reforms

In December 2015, the Japanese cabinet determined to propose a package of tax reforms that includes the reducing of the effective corporate tax rate by approximately 2.4%. If enacted and implemented, we expect that the tax reductions will affect our balance of net deferred tax assets in the fiscal years since they are adopted, and thus could negatively affect our net income for such periods.

Accounting Changes

See note 2 “Recently issued accounting pronouncements” to our consolidated financial statements included elsewhere in this report.

Operating Results

The following table shows certain information as to our income, expenses and net income attributable to MHFG shareholders for the six months ended September 30, 2014 and 2015:


	Six months ended September 30,					Increase (decrease)
	2014			2015		Increase (decrease)
	(in billions of yen)
Interest and dividend income	¥	706		¥	734	¥	28
Interest expense		199			228		29

Net interest income		507			506		(1	)
Provision (credit) for loan losses		(92	)		3		95

Net interest income after provision (credit) for loan losses		599			503		(96	)
Noninterest income		803			854		51
Noninterest expenses		774			814		40

Income before income tax expense		628			543		(85	)
Income tax expense		220			168		(52	)

Net income		408			375		(33	)
Less: Net income attributable to noncontrolling interests		4			9		5

Net income attributable to MHFG shareholders	¥	404		¥	366	¥	(38	)

Executive Summary

Net interest income decreased by ¥1 billion, or 0.2%, from the six months ended September 30, 2014 to ¥506 billion in the six months ended September 30, 2015 due to an increase in interest expense of ¥29 billion, offset in part by an increase in interest and dividend income of ¥28 billion. The increase in interest expense was due mainly to increases in interest expense on deposits and short-term borrowings, offset in part by a decrease in interest expense on trading account liabilities. The increase in interest expense on deposits was due mainly to an increase in the average balance and a rise in the average rate in foreign deposits. The increase in interest expense on short-term borrowings was due mainly to a rise in the average interest rate of foreign short-term borrowings, reflecting a rise in short-term interest rate levels of the U.S. dollar, offset in part by a decrease in the average balance of domestic short-term borrowings. The decrease in interest expense on trading account liabilities was due mainly to a decrease in the average balance of trading account liabilities. The increase in interest and dividend income was due mainly to increases in interest income from loans and interest-bearing deposits in other banks, offset in part by a decrease in interest income from investments. The increase in interest income from loans was due mainly to an increase in the average balance of foreign loans. The increase in interest income from interest-bearing deposits in other banks was due mainly to an increase in the average balance, offset in part by a decline in the average yields. The decrease in interest income from investments was due mainly to a decrease in the average balance of domestic investments assets, primarily as a result of sales and redemptions of Japanese government bonds, offset in part by a rise in the average yields of foreign investment assets. We recorded a provision for loan losses of ¥3 billion in the six months ended September 30, 2015, compared to a credit for loan losses of ¥92 billion in the six months ended September 30, 2014. We recorded a modest level of provision for loan losses in the six months ended September 30, 2015, reflecting how the Japanese economy was in a “leveling off” phase as described in “—Recent Developments—Operating Environment,” whereas we recorded a credit for loan losses in the six months ended September 30, 2014, reflecting how the Japanese economy was in a “gradual recovery” phase.

Noninterest income increased by ¥51 billion, or 6.4%, from the six months ended September 30, 2014 to ¥854 billion in the six months ended September 30, 2015. The increase was due to foreign exchange gains—net of ¥48 billion in the six months ended September 30, 2015, compared to foreign exchange losses—net of ¥6 billion in the corresponding period in the previous fiscal year, and increases in investment gains—net of ¥48 billion, fee and commission of ¥33 billion, and other noninterest income of ¥46 billion, offset in part by a decrease in trading account gains—net of ¥139 billion. The change in foreign exchange gains (losses) —net was due mainly to fluctuations in foreign exchange rates during those periods. The increase in investment gains—net was due mainly to an increase in investment gains related to equity securities.

Noninterest expenses increased by ¥40 billion, or 5.2%, from the six months ended September 30, 2014 to ¥814 billion in the six months ended September 30, 2015, due mainly to increases in salaries and employee benefits of ¥23 billion, general and administrative expenses of ¥19 billion, and occupancy expenses of ¥8 billion. The increase in salaries and employee benefits was due mainly to an increase in personnel expenses, including strategic expenses aimed to strengthen gross profit of overseas offices in our principal banking subsidiary and a reflection of strong operating performance of some of our businesses. This increase in personnel expenses also includes the effect of the depreciation of the yen against the dollar and other major currencies, which increased the yen-equivalent costs. The increase in general and administrative expenses was due mainly to increases in strategic expenses aimed to strengthen gross profit as mentioned immediately above and IT-related costs.

As a result of the foregoing, income before income tax expense decreased by ¥85 billion, or 13.5%, from the six months ended September 30, 2014 to ¥543 billion in the six months ended September 30, 2015. Income tax expense decreased by ¥52 billion, or 23.6%, from the six months ended September 30, 2014 to ¥168 billion in the six months ended September 30, 2015. The decrease in income tax expense was due to a decrease in deferred tax expense of ¥72 billion, offset in part by an increase in current tax expense of ¥20 billion. Net income decreased by ¥33 billion, or 8.1%, from the six months ended September 30, 2014 to ¥375 billion in the six months ended September 30, 2015. Net income attributable to noncontrolling interests increased by ¥5 billion from the six months ended September 30, 2014 to ¥9 billion in the six months ended September 30, 2015.

As a result of the foregoing, net income attributable to MHFG shareholders decreased by ¥38 billion, or 9.4%, from the corresponding period in the previous fiscal year to ¥366 billion in the six months ended September 30, 2015.

Net Interest Income

The following table shows the average balance of interest-earning assets and interest-bearing liabilities, interest amounts and the annualized average interest rates on such assets and liabilities for the six months ended September 30, 2014 and 2015:


	Six months ended September 30,														Increase (decrease)
	2014							2015							Increase (decrease)
	Average balance		Interest amount		Interest rate			Average balance		Interest amount		Interest rate			Average balance			Interest amount			Interest rate
	(in billions of yen, except percentages)
Interest-bearing deposits in other banks	¥	19,945	¥	23		0.23	%	¥	32,175	¥	31		0.19	%	¥	12,230		¥	8			(0.04	)%
Call loans and funds sold, and receivables under resale agreements and securities borrowing transactions		15,168		19		0.25			14,491		26		0.35			(677	)		7			0.10
Trading account assets		18,939		77		0.81			17,075		72		0.84			(1,864	)		(5	)		0.03
Investments		35,210		102		0.58			29,476		94		0.64			(5,734	)		(8	)		0.06
Loans		73,724		485		1.31			77,529		511		1.31			3,805			26			0.00

Total interest-earning assets		162,986		706		0.86			170,746		734		0.86			7,760			28			(0.00	)

Deposits		92,755		71		0.15			102,378		96		0.19			9,623			25			0.04
Short-term borrowings⁽¹⁾		39,428		25		0.13			33,957		33		0.19			(5,471	)		8			0.06
Trading account liabilities		4,572		16		0.70			3,462		11		0.64			(1,110	)		(5	)		(0.06	)
Long-term debt		11,155		87		1.57			15,425		88		1.14			4,270			1			(0.43	)

Total interest-bearing liabilities		147,910		199		0.27			155,222		228		0.29			7,312			29			0.02

Net	¥	15,076	¥	507		0.59		¥	15,524	¥	506		0.57		¥	448		¥	(1	)		(0.02	)

Note:

(1)	Short-term borrowings consist of due to trust accounts, call money and funds purchased, payables under repurchase agreements and securities lending transactions and other short-term borrowings.

Interest and dividend income increased by ¥28 billion, or 4.0%, from the six months ended September 30, 2014 to ¥734 billion in the six months ended September 30, 2015 due mainly to increases in interest income from loans and interest-bearing deposits in other banks, offset in part by a decrease in interest income from investments. The increase in interest income from loans was due mainly to an increase in the average balance of foreign loans. The increase in interest income from interest-bearing deposits in other banks was due mainly to an increase in the average balance, offset in part by a decline in the average yields. The decrease in interest income from investments was due mainly to a decrease in the average balance of domestic investment assets, primarily as a result of sales and redemptions of Japanese government bonds, offset in part by a rise in the average yields of foreign investment assets. The changes in the average yields on interest-earning assets contributed to an overall decrease in interest and dividend income of ¥25 billion, and the changes in average balances of interest-earning assets contributed to an overall increase in interest and dividend income of ¥53 billion, resulting in the ¥28 billion increase in interest and dividend income.

Interest expense increased by ¥29 billion, or 14.6%, from the six months ended September 30, 2014 to ¥228 billion in the six months ended September 30, 2015 due mainly to increases in interest expense on deposits and short-term borrowings, offset in part by a decrease in interest expense on trading account liabilities. The increase in interest expense on deposits was due mainly to an increase in the average balance and a rise in the average rate in foreign deposits. The increase in interest expense on short-term borrowings was due mainly to a rise in the average interest rate of foreign short-term borrowings, reflecting a rise in short-term interest rate levels of the U.S. dollar, offset in part by a decrease in the average balance of domestic short-term borrowings. The decrease in interest expense on trading account liabilities was due mainly to a decrease in the average balance of trading account liabilities. The changes in average interest rates on interest-bearing liabilities contributed to an overall decrease in interest expense of ¥24 billion, and the changes in average balances of interest-bearing liabilities contributed to an overall increase in interest expense of ¥53 billion, resulting in the ¥29 billion increase in interest expense.

As a result of the foregoing, net interest income decreased by ¥1 billion, or 0.2%, from the six months ended September 30, 2014 to ¥506 billion in the six months ended September 30, 2015. Average interest rate spread declined by 0.02% from the six months ended September 30, 2014 to 0.57% in the six months ended September 30, 2015. The decline of the average interest rate spread was due mainly to a rise in average interest rates on short-term borrowings, which more than offset the effect of decline in average interest rates on long-term debt.

Provision (Credit) for Loan Losses

We recorded a provision for loan losses of ¥3 billion in the six months ended September 30, 2015 compared to a credit for loan losses of ¥92 billion in the six months ended September 30, 2014. We recorded a modest level of provision for loan losses in the six months ended September 30, 2015, reflecting how the Japanese economy was in a “leveling off” phase as described in “—Recent Developments—Operating Environment,” whereas we recorded a credit for loan losses in the six months ended September 30, 2014, reflecting how the Japanese economy was in a “gradual recovery” phase.

Noninterest Income

The following table shows a breakdown of noninterest income for the six months ended September 30, 2014 and 2015:


	Six months ended September 30,					Increase (decrease)
	2014			2015		Increase (decrease)
	(in billions of yen)
Fee and commission	¥	332		¥	365	¥	33
Fee and commission from securities-related business		80			90		10
Fee and commission from deposits and lending business		57			71		14
Fee and commission from remittance business		55			55		—
Trust fees		24			25		1
Fees for other customer services		116			124		8
Foreign exchange gains (losses)—net		(6	)		48		54
Trading account gains (losses)—net		288			149		(139	)
Investment gains (losses)—net		101			149		48
Investment gains (losses) related to bonds		48			25		(23	)
Investment gains (losses) related to equity securities		46			115		69
Others		7			9		2
Equity in earnings (losses) of equity method investees—net		18			20		2
Gains on disposal of premises and equipment		2			9		7
Other noninterest income		68			114		46

Total noninterest income	¥	803		¥	854	¥	51

Foreign Exchange Gains (Losses)—Net

Foreign exchange gains (losses)—net was a gain of ¥48 billion in the six months ended September 30, 2015 compared to a loss of ¥6 billion in the corresponding period in the previous fiscal year. The change was due mainly to fluctuations in foreign exchange rates during those periods.

Investment Gains (Losses)—Net

Investment gains—net increased by ¥48 billion, or 47.5%, from the six months ended September 30, 2014 to ¥149 billion in the six months ended September 30, 2015. The increase was due mainly to an increase in investment gains related to equity securities of ¥69 billion, or 150.0%, from the six months ended September 30, 2014 to ¥115 billion in the six months ended September 30, 2015, offset in part by a decrease in investment gains related to bonds of ¥23 billion, or 47.9%, from the six months ended September 30, 2014 to ¥25 billion in the six months ended September 30, 2015. The increase in investment gains related to equity securities was due mainly to an increase in gains on sales of equity securities for the six months ended September 30, 2015, which reflected more favorable market conditions during the six months ended September 30, 2015 than in the corresponding period in the previous fiscal year. The decrease in investment gains related to bonds was due mainly to a decrease in gains on sales of bonds for the six months ended September 30, 2015, which reflected a decrease in the sales of Japanese government bonds during the six months ended September 30, 2015 compared to those in the corresponding period in the previous fiscal year.

Fee and Commission

Fee and commission increased by ¥33 billion, or 9.9%, from the six months ended September 30, 2014 to ¥365 billion in the six months ended September 30, 2015. The increase was due mainly to increases in fee and commission from deposits and lending business of ¥14 billion, or 24.6%, and fee and commission from securities-related business of ¥10 billion, or 12.5%. The increase in fee and commission from deposits and lending business was due mainly to an increase in fee from lending business during the six months ended September 30, 2015, compared to the corresponding period in the previous fiscal year. The increase in fee and commission from securities-related business was due mainly to more favorable stock market conditions during the six months ended September 30, 2015 than in the corresponding period in the previous fiscal year.

Trading Account Gains (Losses)—Net

Trading account gains—net decreased by ¥139 billion, or 48.3%, from the six months ended September 30, 2014 to ¥149 billion in the six months ended September 30, 2015. The decrease was due mainly to changes in the fair value of foreign currency denominated securities for which the fair value option was elected, reflecting a rise in long-term interest rates of European countries, and offset in part by an increase in gains related to changes in the fair value of derivative financial instruments used to hedge market risks, mainly interest rate risks, that are not eligible for hedge accounting under U.S. GAAP. For further information on the fair value option, see note 17 to our consolidated financial statements included elsewhere in this report.

Noninterest Expenses

The following table shows a breakdown of noninterest expenses for the six months ended September 30, 2014 and 2015:


	Six months ended September 30,						Increase (decrease)
	2014			2015			Increase (decrease)
	(in billions of yen)
Salaries and employee benefits	¥	293		¥	316		¥	23
General and administrative expenses		250			269			19
Occupancy expenses		93			101			8
Fee and commission expenses		70			77			7
Provision (credit) for losses on off-balance-sheet instruments		(8	)		(9	)		(1	)
Other noninterest expenses		76			60			(16	)

Total noninterest expenses	¥	774		¥	814		¥	40

Noninterest expenses increased by ¥40 billion, or 5.2%, from the six months ended September 30, 2014 to ¥814 billion in the six months ended September 30, 2015. This increase was due mainly to increases in salaries and employee benefits of ¥23 billion, general and administrative expenses of ¥19 billion, and occupancy expenses of ¥8 billion.

Salaries and Employee Benefits

Salaries and employee benefits increased by ¥23 billion, or 7.8%, from the six months ended September 30, 2014 to ¥316 billion in the six months ended September 30, 2015. The increase was due mainly to an increase in personnel expenses, including strategic expenses aimed to strengthen gross profit of overseas offices in our principal banking subsidiary and a reflection of strong operating performance of some of our businesses. This increase in personnel expenses also includes the effect of the depreciation of the yen against the dollar and other major currencies, which increased the yen-equivalent costs.

General and Administrative Expenses

General and administrative expenses increased by ¥19 billion, or 7.6%, from the six months ended September 30, 2014 to ¥269 billion in the six months ended September 30, 2015. The increase was due mainly to increases in strategic expenses aimed to strengthen gross profit of overseas offices in our principal banking subsidiary and IT-related costs. The increase in strategic expenses also includes the effect of the depreciation of the yen against the dollar and other major currencies, which increased the yen-equivalent costs.

Occupancy Expenses

Occupancy expenses increased by ¥8 billion, or 8.6%, from the six months ended September 30, 2014 to ¥101 billion in the six months ended September 30, 2015 due mainly to an increase in rent expenses.

Income Tax Expense

Income tax expense decreased by ¥52 billion, or 23.6%, from the six months ended September 30, 2014 to ¥168 billion in the six months ended September 30, 2015. The decrease was due to a decrease in deferred tax expense of ¥72 billion, offset in part by an increase in current tax expense of ¥20 billion. The decrease in deferred tax expense was due mainly to decelerated decreases in the temporary differences of our principal banking subsidiaries. The increase in current tax expense was due mainly to increases in the taxable income of our principal banking subsidiaries.


	Six months ended September 30,				Increase (decrease)
	2014		2015		Increase (decrease)
	(in billions of yen)
Income before income tax expense	¥	628	¥	543	¥	(85	)
Income tax expense		220		168		(52	)
Current tax expense		118		138		20
Deferred tax expense		102		30		(72	)

Net income		408		375		(33	)
Less: Net income attributable to noncontrolling interests		4		9		5

Net income attributable to MHFG shareholders	¥	404	¥	366	¥	(38	)

We consider the sales of available-for-sale securities to be a qualifying tax-planning strategy that is possible source of future taxable income to the extent necessary in the future mainly with respect to our principal banking subsidiaries in Japan. The reliance on this tax-planning strategy of our subsidiaries in Japan was at immaterial levels of overall deferred tax assets at both March 31, 2015 and September 30, 2015, while the reliance was reduced from approximately one-fifth to approximately one-tenth of overall deferred tax assets during the six months ended September 30, 2014.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests increased by ¥5 billion from the six months ended September 30, 2014 to ¥9 billion in the six months ended September 30, 2015.

Net Income Attributable to MHFG Shareholders

Business Segments Analysis

Our operating segments are based on the nature of the products and services provided, the type of customer and our management organization. The business segment information set forth below is derived from the internal management reporting systems used by management to measure the performance of our business segments. We measure the performance of each of our operating segments primarily in terms of “net business profits” in accordance with internal managerial accounting rules and practices. Net business profits is used in Japan as a measure of the profitability of core banking operations, and is defined as gross profits (or the sum of net interest income, fiduciary income, net fee and commission income, net trading income and net other operating income) less general and administrative expenses. Measurement of net business profits is required for regulatory reporting to the Financial Services Agency. Therefore, the format and information are presented primarily on the basis of Japanese GAAP and are not consistent with the consolidated financial statements prepared in accordance with U.S. GAAP. A reconciliation of the total amount of segments’ net business profits with income before income tax expense under U.S. GAAP is provided in note 20 to our consolidated financial statements included elsewhere in this report.

We engage in banking, trust banking, securities and other businesses through our consolidated subsidiaries and affiliates. As these subsidiaries and affiliates operate in different industries and regulatory environments, we disclose business segment information based on the relevant principal consolidated subsidiaries such as Mizuho Bank, Mizuho Trust & Banking and Mizuho Securities for investors to measure the present and future cash flows properly.

The operating segments of Mizuho Bank are aggregated based on the type of customer characteristics into the following seven reportable segments: Personal Banking; Retail Banking; Corporate Banking (Large Corporations); Corporate Banking; Financial Institutions & Public Sector Business; International Banking; and Trading and others. Mizuho Trust & Banking and Mizuho Securities also constitute reportable segments respectively.

For a brief description of our each business segment, see note 20 to our consolidated financial statements included elsewhere in this report.

Results of Operations by Business Segment

Consolidated Results of Operations

Consolidated gross profits for the six months ended September 30, 2015 were ¥1,131.8 billion, an increase of ¥64.7 billion compared to the six months ended September 30, 2014. Consolidated general and administrative expenses for the six months ended September 30, 2015 were ¥672.3 billion, an increase of ¥39.5 billion compared to the six months ended September 30, 2014. Consolidated net business profits for the six months ended September 30, 2015 were ¥446.7 billion, an increase of ¥33.8 billion compared to the six months ended September 30, 2014.


	Mizuho Bank (Consolidated)																						Mizuho Trust & Banking (Consolidated)			Mizuho Securities (Consolidated)		Others			Mizuho Financial Group (Consolidated)
				Mizuho Bank (Non-consolidated)																Others
	Total			Total		Personal Banking (a)		Retail Banking (b)		Corporate Banking (Large Corporations) (c)		Corporate Banking (d)		Financial Institutions & Public Sector Business (e)		International Banking (f)		Trading and others (g)		(h)			(i)			(j)		(k)			Total
	(in billions of yen)
Six months ended September 30, 2014⁽¹⁾⁽²⁾:
Gross profits:
Net interest income (expense)	¥	522.3		¥	450.8	¥	106.7	¥	39.0	¥	87.3	¥	49.5	¥	16.1	¥	74.4	¥	77.8	¥	71.5		¥	19.0		¥	0.4	¥	(0.3	)	¥	541.4
Net noninterest income		292.2			279.7		19.3		25.4		57.3		33.4		12.8		65.5		66.0		12.5			55.7			147.4		30.4			525.7

Total		814.5			730.5		126.0		64.4		144.6		82.9		28.9		139.9		143.8		84.0			74.7			147.8		30.1			1,067.1
General and administrative expenses		437.0			407.1		115.0		59.5		47.0		38.3		14.8		46.8		85.7		29.9			46.0			125.9		23.9			632.8
Others		(17.3	)		—		—		—		—		—		—		—		—		(17.3	)		(1.8	)		—		(2.3	)		(21.4	)

Net business profits	¥	360.2		¥	323.4	¥	11.0	¥	4.9	¥	97.6	¥	44.6	¥	14.1	¥	93.1	¥	58.1	¥	36.8		¥	26.9		¥	21.9	¥	3.9		¥	412.9


	Mizuho Bank (Consolidated)																						Mizuho Trust & Banking (Consolidated)			Mizuho Securities (Consolidated)		Others		Mizuho Financial Group (Consolidated)
				Mizuho Bank (Non-consolidated)																Others
	Total			Total		Personal Banking (a)		Retail Banking (b)		Corporate Banking (Large Corporations) (c)		Corporate Banking (d)		Financial Institutions & Public Sector Business (e)		International Banking (f)		Trading and others (g)		(h)			(i)			(j)		(k)		Total
	(in billions of yen)
Six months ended September 30, 2015⁽¹⁾:
Gross profits:
Net interest income	¥	499.7		¥	430.9	¥	107.7	¥	38.2	¥	85.4	¥	48.8	¥	16.3	¥	86.8	¥	47.7	¥	68.8		¥	20.1		¥	1.9	¥	1.7	¥	523.4
Net noninterest income		342.9			325.4		19.5		25.6		69.6		35.8		14.9		93.6		66.4		17.5			61.0			172.8		31.7		608.4

Total		842.6			756.3		127.2		63.8		155.0		84.6		31.2		180.4		114.1		86.3			81.1			174.7		33.4		1,131.8
General and administrative expenses		452.8			417.8		117.2		60.1		45.7		37.4		14.6		63.4		79.4		35.0			49.2			141.4		28.9		672.3
Others		(11.3	)		—		—		—		—		—		—		—		—		(11.3	)		(1.7	)		—		0.2		(12.8	)

Net business profits	¥	378.5		¥	338.5	¥	10.0	¥	3.7	¥	109.3	¥	47.2	¥	16.6	¥	117.0	¥	34.7	¥	40.0		¥	30.2		¥	33.3	¥	4.7	¥	446.7

Notes:

(1)	“Others (h)” and “Others (k)” include the elimination of transactions between consolidated subsidiaries.

(2)	Beginning on April 1, 2015, new allocation methods have been applied to the calculation of “Gross profits” and “General and administrative expenses” for reportable segments of Mizuho Bank. Figures for the six months ended September 30, 2014 have been reclassified under the new allocation methods.

Mizuho Bank

Gross profits for the six months ended September 30, 2015 were ¥756.3 billion, an increase of ¥25.8 billion, or 3.5%, compared to the six months ended September 30, 2014. The increase was attributable mainly to an increase in gross profits related to our customer groups due to an increase in noninterest income in international banking, reflecting an increase in fee and commission income from non-Japanese customers in the United States, and corporate banking (large corporations), reflecting our involvement in large solution-related business transactions, although interest income decreased overall. This increase was offset in part by a decrease in gross profits in trading and others.

General and administrative expenses for the six months ended September 30, 2015 increased by ¥10.7 billion, or 2.6%, compared to the six months ended September 30, 2014 to ¥417.8 billion. The increase was attributable mainly to an increase in overseas expenses as a result of strategic expenses for strengthening gross profits and the depreciation of the yen against the dollar and other major currencies, which increased the yen-equivalent costs related to our overseas operations, offset in part by our group-wide cost reduction efforts, including our cost restructuring measures.

As a result, net business profits for the six months ended September 30, 2015 increased by ¥15.1 billion, or 4.7%, compared to the six months ended September 30, 2014 to ¥338.5 billion.

Mizuho Trust & Banking

Gross profits for the six months ended September 30, 2015 were ¥81.1 billion, an increase of ¥6.4 billion, or 8.6%, compared to the six months ended September 30, 2014. The increase was attributable mainly to an increase in noninterest income related to trust and asset management such as pension and asset custody as well as trading.

General and administrative expenses for the six months ended September 30, 2015 increased by ¥3.2 billion, or 7.0%, compared to the six months ended September 30, 2014 to ¥49.2 billion. The increase reflected income growth as well as the depreciation of the yen against the dollar and other major currencies, which increased the yen-equivalent costs related to our overseas operations.

As a result, net business profits for the six months ended September 30, 2015 increased by ¥3.3 billion, or 12.3%, compared to the six months ended September 30, 2014 to ¥30.2 billion.

Mizuho Securities

Gross profits for the six months ended September 30, 2015 were ¥174.7 billion, an increase of ¥26.9 billion, or 18.2%, compared to the six months ended September 30, 2014. The increase was attributable mainly to an increase in fee and commission income related to equity securities and investment trusts as well as trading income.

General and administrative expenses for the six months ended September 30, 2015 increased by ¥15.5 billion, or 12.3%, compared to the six months ended September 30, 2014 to ¥141.4 billion. The increase was attributable mainly to an increase in operational expenses and personnel expenses reflecting the favorable operating results.

As a result, net business profits for the six months ended September 30, 2015 increased by ¥11.4 billion, or 52.1%, compared to the six months ended September 30, 2014 to ¥33.3 billion.

Financial Condition

Assets

Our assets as of March 31, 2015 and September 30, 2015 were as follows:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
	(in billions of yen)
Cash and due from banks	¥	1,528		¥	1,510		¥	(18	)
Interest-bearing deposits in other banks		27,853			33,977			6,124
Call loans and funds sold		444			455			11
Receivables under resale agreements		8,582			8,618			36
Receivables under securities borrowing transactions		4,059			3,900			(159	)
Trading account assets		29,416			28,696			(720	)
Investments		33,416			30,774			(2,642	)
Loans		78,048			78,257			209
Allowance for loan losses		(520	)		(465	)		55

Loans, net of allowance		77,528			77,792			264
Premises and equipment—net		1,632			1,738			106
Due from customers on acceptances		139			178			39
Accrued income		280			268			(12	)
Goodwill		12			11			(1	)
Intangible assets		54			51			(3	)
Deferred tax assets		58			57			(1	)
Other assets		5,119			4,312			(807	)

Total assets	¥	190,120		¥	192,337		¥	2,217

Total assets increased by ¥2,217 billion from ¥190,120 billion as of March 31, 2015 to ¥192,337 billion as of September 30, 2015. This increase was due mainly to an increase of ¥6,124 billion in interest-bearing deposits in other banks, primarily those in the Bank of Japan and an increase of ¥264 billion in loans, net of allowance, offset in part by a decrease of ¥2,642 billion in investments, primarily Japanese government bonds and equity securities (marketable).

Loans

Loans Outstanding

The following table shows our loans outstanding as of March 31, 2015 and September 30, 2015:


	As of										Increase (decrease)
	March 31, 2015					September 30, 2015					Increase (decrease)
	(in billions of yen, except percentages)
Domestic:
Manufacturing	¥	8,224		10.5	%	¥	8,307		10.6	%	¥	83		0.1	%
Construction and real estate		7,354		9.4			7,539		9.6			185		0.2
Services		4,273		5.5			4,422		5.6			149		0.1
Wholesale and retail		5,587		7.1			5,510		7.0			(77	)	(0.1	)
Transportation and communications		3,157		4.1			3,112		4.0			(45	)	(0.1	)
Banks and other financial institutions		3,853		4.9			3,797		4.8			(56	)	(0.1	)
Government and public institutions		4,612		5.9			4,160		5.3			(452	)	(0.6	)
Other industries⁽¹⁾		5,080		6.5			4,760		6.1			(320	)	(0.4	)
Individuals		11,870		15.2			11,749		15.0			(121	)	(0.2	)
Mortgage loans		11,022		14.1			10,844		13.8			(178	)	(0.3	)
Other		848		1.1			905		1.2			57		0.1

Total domestic		54,010		69.1			53,356		68.0			(654	)	(1.1	)
Foreign:
Commercial and industrial		16,688		21.3			16,912		21.6			224		0.3
Banks and other financial institutions		6,077		7.8			6,719		8.6			642		0.8
Government and public institutions		1,011		1.3			1,066		1.3			55		0.0
Other⁽¹⁾		426		0.5			373		0.5			(53	)	0.0

Total foreign		24,202		30.9			25,070		32.0			868		1.1

Subtotal		78,212		100.0	%		78,426		100.0	%		214		—

Less: Unearned income and deferred loan fees—net		(164	)				(169	)				(5	)

Total loans before allowance for loan losses	¥	78,048				¥	78,257				¥	209

Note:

(1)	“Other industries” within domestic and “other” within foreign include trade receivables and lease receivables of consolidated variable interest entities.

Total loans before allowance for loan losses increased by ¥209 billion from the end of the previous fiscal year to ¥78,257 billion as of September 30, 2015. Loans to domestic borrowers decreased by ¥654 billion from the end of the previous fiscal year to ¥53,356 billion as of September 30, 2015, due primarily to a decrease in loans to government and public institutions and other industries.

Loans to foreign borrowers increased by ¥868 billion from the end of the previous fiscal year to ¥25,070 billion as of September 30, 2015. The increase in loans to foreign borrowers was due primarily to an increase in banks and other financial institutions, in almost all regions.

Within our loan portfolio, loans to domestic borrowers decreased from 69.1% to 68.0% while loans to foreign borrowers increased from 30.9% to 32.0%.

Balance of Impaired Loans

The following table shows our impaired loans as of March 31, 2015 and September 30, 2015 based on classifications by domicile and industry segment:


	As of										Increase (decrease)
	March 31, 2015					September 30, 2015					Increase (decrease)
	Impaired loans		Ratio to gross total loans to industry			Impaired loans		Ratio to gross total loans to industry			Impaired loans			Ratio to gross total loans to industry
	(in billions of yen, except percentages)
Domestic:
Manufacturing	¥	480		5.8	%	¥	378		4.6	%	¥	(102	)		(1.2	)%
Construction and real estate		101		1.4			89		1.2			(12	)		(0.2	)
Services		71		1.7			72		1.6			1			(0.1	)
Wholesale and retail		150		2.7			150		2.7			—			0.0
Transportation and communications		36		1.1			35		1.1			(1	)		0.0
Banks and other financial institutions		5		0.1			7		0.2			2			0.1
Other industries		1		0.0			4		0.0			3			0.0
Individuals		143		1.2			133		1.1			(10	)		(0.1	)

Total domestic		987		1.8			868		1.6			(119	)		(0.2	)
Foreign		188		0.8			204		0.8			16			0.0

Total impaired loans	¥	1,175		1.5		¥	1,072		1.4		¥	(103	)		(0.1	)

Impaired loans decreased by ¥103 billion, or 8.8%, from the end of the previous fiscal year to ¥1,072 billion as of September 30, 2015. Impaired loans to domestic borrowers decreased by ¥119 billion due mainly to a decrease in manufacturing as a result of the restructuring on certain borrowers. Impaired loans to foreign borrowers increased by ¥16 billion, and the relative impact of foreign currency fluctuations on the increase was immaterial.

Reflecting the aforementioned change, the percentage of impaired loans within gross total loans decreased from 1.5% as of March 31, 2015 to 1.4% as of September 30, 2015. The percentage of impaired loans net of allowance for loan losses to gross total loans net of allowance decreased from 0.84% as of March 31, 2015 to 0.78% as of September 30, 2015, due to a decrease in impaired loans net of allowance for loan losses and an increase in gross total loans net of allowance for loan losses.

Allowance for Loan Losses

Balance of allowance for loan losses

The following table summarizes the allowance for loan losses by component and as a percentage of the corresponding loan balance as of March 31, 2015 and September 30, 2015:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
	(in billions of yen, except percentages)
Allowance for loan losses on impaired loans⁽¹⁾ (A)	¥	352		¥	308		¥	(44	)
Allowance for loan losses on non-impaired loans (B)		168			157			(11	)

Total allowance for loan losses (C)		520			465			(55	)
Impaired loans requiring an allowance for loan losses (D)		1,025			931			(94	)
Impaired loans not requiring an allowance for loan losses (E)		150			141			(9	)
Non-impaired loans⁽²⁾ (F)		77,037			77,354			317

Gross total loans (G)	¥	78,212		¥	78,426		¥	214

Percentage of allowance for loan losses on impaired loans against the balance of impaired loans requiring an allowance (A)/(D)x100		34.37	%		33.11	%		(1.26	)%
Percentage of allowance for loan losses on non-impaired loans against the balance of non-impaired loans (B)/(F)x100		0.22			0.20			(0.02	)
Percentage of total allowance for loan losses against gross total loans (C)/(G)x100		0.67			0.59			(0.08	)

Notes:

(1)

The allowance for loan losses on impaired loans includes the allowance for groups of small balance, homogeneous loans totaling ¥378 billion as of September 30, 2015 which were collectively evaluated for impairment, in addition to the allowance on loans that were individually evaluated for impairment.

(2)	Non-impaired loans refer to loans categorized as “normal obligors” and “watch obligors (excluding special attention obligors)” under our internal rating system.

Allowance for loan losses decreased by ¥55 billion from the end of the previous fiscal year to ¥465 billion as of September 30, 2015. This decrease was due to a decrease of ¥44 billion in the allowance for loan losses on impaired loans as a result of a decrease in impaired loans requiring an allowance for loan losses and a decrease of ¥11 billion in the allowance for loan losses on non-impaired loans as a result primarily of upgrades in the obligor categories of a broad range borrowers. Gross total loans increased due to an increase in non-impaired loans offset in part by a decrease in impaired loans. As a result, the percentage of total allowance for loan losses against gross total loans decreased by 0.08% to 0.59% and the percentage of allowance for loan losses on impaired loans against the balance of impaired loans requiring an allowance decreased by 1.26% to 33.11%.

The primary factors behind the gap between the 10.6% decrease in allowance for loan losses and the 0.3% increase in the balance of gross total loans as of September 30, 2015 compared to March 31, 2015 consisted mainly of the increase in the balance of non-impaired loans, the decrease in impaired loans requiring an allowance for loan losses due to improvement in our loan portfolio and the decrease in the percentage of allowance for loan losses on impaired loans against the balance of impaired loans.

Impaired loans decreased by 8.8% from the end of the previous fiscal year due mainly to a decrease in impaired loans requiring an allowance for loan losses. Allowance for loan losses on impaired loans decreased by 12.5%.

The coverage ratio for impaired loans decreased by 0.9% as of September 30, 2015 compared to March 31, 2015. The decrease was due to how the percentage decrease in allowance for loan losses was greater than the percentage decrease in impaired loans.

Provision (credit) for loan losses

The following table summarizes changes in our allowance for loan losses in the six months ended September 30, 2014 and 2015:


	Six months ended September 30,						Increase (decrease)
	2014			2015			Increase (decrease)
	(in billions of yen)
Allowance for loan losses at beginning of fiscal year	¥	626		¥	520		¥	(106	)
Provision (credit) for loan losses		(92	)		3			95
Charge-offs		(24	)		(67	)		(43	)
Recoveries		15			10			(5	)

Net charge-offs		(9	)		(57	)		(48	)
Others⁽¹⁾		3			(1	)		(4	)

Balance at end of six-month period	¥	528		¥	465		¥	(63	)

Note:

(1)	“Others” includes primarily foreign exchange translation.

Charge-offs increased by ¥43 billion from the six months ended September 30, 2014 to ¥67 billion for the six months ended September 30, 2015. The increase was due primarily to an increase in charge-offs of domestic loans.

Investments

The majority of our investments are available-for-sale and held-to-maturity securities, which as of March 31, 2015 and September 30, 2015 were as follows:


	As of													Increase (decrease)
	March 31, 2015						September 30, 2015							Increase (decrease)
	Amortized cost		Fair value		Net unrealized gains (losses)		Amortized cost		Fair value		Net unrealized gains (losses)			Amortized cost			Fair value			Net unrealized gains (losses)
	(in billions of yen)
Available-for-sale securities:
Debt securities	¥	22,601	¥	22,674	¥	73	¥	20,930	¥	20,999	¥	69		¥	(1,671	)	¥	(1,675	)	¥	(4	)
Japanese government bonds		17,391		17,414		23		15,572		15,595		23			(1,819	)		(1,819	)		—
Other than Japanese government bonds		5,210		5,260		50		5,358		5,404		46			148			144			(4	)
Equity securities (marketable)		1,698		4,397		2,699		1,599		3,928		2,329			(99	)		(469	)		(370	)

Total	¥	24,299	¥	27,071	¥	2,772	¥	22,529	¥	24,927	¥	2,398		¥	(1,770	)	¥	(2,144	)	¥	(374	)

Held-to-maturity securities:
Debt securities:
Japanese government bonds		4,360		4,389		29		4,060		4,093		33			(300	)		(296	)		4
Agency mortgage-backed securities		1,287		1,289		2		1,192		1,187		(5	)		(95	)		(102	)		(7	)

Total	¥	5,647	¥	5,678	¥	31	¥	5,252	¥	5,280	¥	28		¥	(395	)	¥	(398	)	¥	(3	)

Available-for-sale securities decreased by ¥2,144 billion from the end of the previous fiscal year to ¥24,927 billion as of September 30, 2015. This decrease was due primarily to a decrease in Japanese government bonds due to the sales and redemptions as a result of our risk management activities related to our bond portfolio, and a decrease in equity securities (marketable) due to the decline in Japanese stock prices as of September 30, 2015 compared to those as of March 31, 2015. Held-to-maturity securities decreased by ¥395 billion from the end of the previous fiscal year to ¥5,252 billion as of September 30, 2015. See note 3 to our consolidated financial statements for details of other investments included within investments.

Cash and Due from Banks

Cash and due from banks decreased by ¥18 billion from the end of the previous fiscal year to ¥1,510 billion as of September 30, 2015. The decrease was due to net cash used in investing activities of ¥4,658 billion, offset in part by net cash provided by financial activities of ¥3,583 billion and net cash provided by operating activities of ¥1,062 billion.

Liabilities

The following table shows our liabilities as of March 31, 2015 and September 30, 2015:


	As of				Increase (decrease)
	March 31, 2015		September 30, 2015		Increase (decrease)
	(in billions of yen)
Deposits	¥	114,206	¥	116,598	¥	2,392
Due to trust accounts		1,241		1,397		156
Call money and funds purchased		5,091		5,738		647
Payables under repurchase agreements		19,612		19,677		65
Payables under securities lending transactions		2,462		2,349		(113	)
Other short-term borrowings		1,583		1,909		326
Trading account liabilities		16,472		15,717		(755	)
Bank acceptances outstanding		139		178		39
Income taxes payable		159		106		(53	)
Deferred tax liabilities		294		200		(94	)
Accrued expenses		154		157		3
Long-term debt		14,582		14,584		2
Other liabilities		5,935		5,589		(346	)

Total liabilities	¥	181,930	¥	184,199	¥	2,269

Total liabilities increased by ¥2,269 billion from the end of the previous fiscal year to ¥184,199 billion as of September 30, 2015. This increase was due primarily to increases of ¥2,392 billion in deposits and ¥1,081 billion in short-term borrowings, offset in part by a decrease of ¥755 billion in trading account liabilities, primarily derivative contracts. We analyze short-term borrowings, consisting of due to trust accounts, call money and funds purchased, payables under repurchase agreements, payables under securities lending transactions and other short-term borrowings, on a combined basis.

Deposits

The following table shows a breakdown of our deposits as of March 31, 2015 and September 30, 2015:


	As of				Increase (decrease)
	March 31, 2015		September 30, 2015		Increase (decrease)
	(in billions of yen)
Domestic:
Noninterest-bearing deposits	¥	13,576	¥	13,945	¥	369
Interest-bearing deposits		78,188		79,323		1,135

Total domestic deposits		91,764		93,268		1,504


Foreign:
Noninterest-bearing deposits		1,358		1,527		169
Interest-bearing deposits		21,084		21,803		719

Total foreign deposits		22,442		23,330		888

Total deposits	¥	114,206	¥	116,598	¥	2,392

Deposits increased by ¥2,392 billion from the end of the previous fiscal year to ¥116,598 billion as of September 30, 2015. Domestic deposits increased by ¥1,504 billion from the end of the previous fiscal year to

¥93,268 billion as of September 30, 2015. Domestic interest-bearing deposits increased by ¥1,135 billion from the end of the previous fiscal year to ¥79,323 billion as of September 30, 2015, due mainly to increases in time deposits and certificates of deposits. Foreign deposits increased by ¥888 billion from the end of the previous fiscal year to ¥23,330 billion as of September 30, 2015, due mainly to an increase in time deposits, offset in part by a decrease in certificates of deposits.

Short-term Borrowings

The following table shows a breakdown of our short-term borrowings as of March 31, 2015 and September 30, 2015:


	As of												Increase (decrease)
	March 31, 2015						September 30, 2015						Increase (decrease)
	Domestic		Foreign		Total		Domestic		Foreign		Total		Domestic			Foreign			Total
	(in billions of yen)
Due to trust accounts	¥	1,241	¥	—	¥	1,241	¥	1,397	¥	—	¥	1,397	¥	156		¥	—			¥ 156
Call money and funds purchased, and payables under repurchase agreements and securities lending transactions		8,857		18,308		27,165		10,366		17,398		27,764		1,509			(910	)		599
Other short-term borrowings		1,237		346		1,583		1,216		693		1,909		(21	)		347			326

Total short-term borrowings	¥	11,335	¥	18,654	¥	29,989	¥	12,979	¥	18,091	¥	31,070	¥	1,644		¥	(563	)		¥1,081

Short-term borrowings increased by ¥1,081 billion from the end of the previous fiscal year to ¥31,070 billion as of September 30, 2015. Domestic short-term borrowings increased by ¥1,644 billion due mainly to increases in payables under repurchase agreements, and call money and funds purchased. Foreign short-term borrowings decreased by ¥563 billion due mainly to a decrease in payables under repurchase agreements, offset in part by an increase in other short-term borrowings.

Equity

The following table shows a breakdown of equity as of March 31, 2015 and September 30, 2015:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
	(in billions of yen)
MHFG shareholders’ equity:
Preferred stock	¥	213		¥	144		¥	(69	)
Common stock		5,590			5,659			69
Retained earnings		90			355			265
Accumulated other comprehensive income, net of tax		2,041			1,745			(296	)
Treasury stock, at cost		(4	)		(4	)		—

Total MHFG shareholders’ equity		7,930			7,899			(31	)
Noncontrolling interests		260			239			(21	)

Total equity	¥	8,190		¥	8,138		¥	(52	)

Equity decreased by ¥52 billion from the end of the previous fiscal year to ¥8,138 billion as of September 30, 2015 due mainly to a decrease in accumulated other comprehensive income, net of tax, offset in part by an increase in retained earnings.

Preferred stock decreased by ¥69 billion from the end of the previous fiscal year to ¥144 billion as of September 30, 2015 as a result of the conversion of preferred stock to common stock.

Common stock increased by ¥69 billion from the end of the previous fiscal year to ¥5,659 billion as of September 30, 2015 primarily as a result of the issuance of new shares of common stock related to the conversion of preferred stock to common stock.

Retained earnings increased by ¥265 billion from the end of the previous fiscal year to ¥355 billion as of September 30, 2015. This increase was due primarily to net income attributable to MHFG shareholders for the six months ended September 30, 2015 of ¥366 billion, offset in part by dividend payment of ¥101 billion.

Accumulated other comprehensive income, net of tax decreased by ¥296 billion from the end of the previous fiscal year to ¥1,745 billion as of September 30, 2015 due primarily to a decrease in unrealized net gains on available-for-sale securities of ¥253 billion.

Treasury stock, at cost as of September 30, 2015 was the same level compared to that as of March 31, 2015.

Noncontrolling interests decreased by ¥21 billion from the end of the previous fiscal year to ¥239 billion as of September 30, 2015.

Liquidity

We continuously endeavor to enhance the management of our liquidity profile to meet our customers’ loan demand and deposit withdrawals and respond to unforeseen situations such as adverse movements in stock, foreign currencies, interest rates and other markets or changes in general domestic or international conditions. We manage our liquidity profile through the continuous monitoring of our cash flow situation, the enforcement of upper limits on funds raised in financial markets and other means as further set forth in “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Market and Liquidity Risk Management—Liquidity Risk Management Structure” in our most recent Form 20-F filed with the U.S. Securities and Exchange Commission.

Deposits, based on our broad customer base and brand recognition in Japan, have been our primary source of liquidity. Our total deposits increased by ¥2,392 billion, or 2.1%, from the end of the previous fiscal year to ¥116,598 billion as of September 30, 2015. Our average balance of deposits for the six months ended September 30, 2015 of ¥116,435 billion exceeded our average balance of loans for the same period by ¥38,906 billion. We invested the excess portion primarily in marketable securities and other high liquidity assets.

Secondary sources of liquidity include short-term borrowings such as call money and funds purchased and payables under repurchase agreements. We also issue long-term debt, including both senior and subordinated debt, as additional sources for liquidity. We utilize short-term borrowings to diversify our funding sources and to manage our funding costs. We raise subordinated long-term debt for the purpose of improving our capital adequacy ratios, which also enhances our liquidity profile. We believe we are able to access such sources of liquidity on a stable and flexible basis based on our current credit ratings. The following table shows credit ratings assigned to our principal banking subsidiaries by S&P and Moody’s as of December 31, 2015:

As of December 31, 2015

S&P

Moody’s

Long-term

Short-term

Stand-alone
credit profile

Long-term

Short-term

Baseline
credit
assessment

Mizuho Bank

A⁽¹⁾

A-1

P-1

baa1

Mizuho Trust & Banking

A⁽¹⁾

A-1

P-1

baa1

Note:

(1)	S&P downgraded the long-term obligations of Mizuho Bank and Mizuho Trust & Banking by one notch to A and stable on September 17, 2015.

We source our funding in foreign currencies primarily from corporate customers, foreign governments, financial institutions and institutional investors, through short-term and long-term financing, under terms and pricing commensurate with our credit ratings above. In the event of future declines in our credit quality or that of

Japan in general, we expect to be able to purchase foreign currencies in sufficient amounts using the yen funds raised through our domestic customer base. As further measures to support our foreign currency liquidity, we hold foreign debt securities, maintain credit lines and swap facilities denominated in foreign currencies and pledge collateral to the U.S. Federal Reserve Bank to support future credit extensions.

In order to maintain appropriate funding liquidity, our principal banking subsidiaries hold highly liquid investment assets such as Japanese government bonds as liquidity reserve assets. We monitor the amount of liquidity reserve assets and report such amount to the monthly risk management committee. Minimum regulatory reserve amounts, or the reserve amount deposited with the Bank of Japan pursuant to applicable regulations that is calculated as a specified percentage of the amount of deposits held by our principal banking subsidiaries, are excluded in connection with our management of liquidity reserve asset levels. We established and apply classifications for the cash flow conditions affecting the group, including the amount of liquidity reserve assets, that range from “Normal” to “Anxious” and “Crisis” categories, and take appropriate actions based on such conditions. As of September 30, 2015, the balance of Japanese government bonds included within our investments was ¥15.6 trillion (excluding held-to-maturity securities), and a majority of this amount, which has historically not fluctuated significantly over the course of a fiscal year, was classified as the principal component of liquidity reserve assets.

Related to regulatory liquidity requirements, the liquidity coverage ratio (LCR) standard has been introduced in Japan. Under the standard, LCR is defined as the ratio obtained by dividing the sum of the amounts of high-quality liquid assets by the amount of net cash outflows, as each term is defined in and calculated pursuant to Financial Service Agency guidelines. The minimum LCR under the LCR guidelines is 100% on both a consolidated and non-consolidated basis for banks with international operations or on a consolidated basis for bank holding companies with international operations, while it is subject to phase-in arrangements pursuant to which the LCR is introduced with a minimum requirement of 60% during the period from March 31 to December 31, 2015, which subsequently rises in equal annual steps of 10 percentage points to reach 100% on January 1, 2019. Set forth below is the consolidated LCR data of Mizuho Financial Group and our principal banking subsidiaries as of September 30, 2015.


	As of September 30, 2015
	(in billions of yen, except percentages)
Mizuho Financial Group (Consolidated)
Total high-quality liquid assets (“HQLA”) allowed to be included in the calculation (weighted)	¥	54,533
Net cash outflows (weighted)		42,450
LCR		128	.4%
Mizuho Bank (Consolidated)
Total HQLA allowed to be included in the calculation (weighted)	¥	48,522
Net cash outflows (weighted)		37,150
LCR		130	.6%
Mizuho Trust and Banking (Consolidated)
Total HQLA allowed to be included in the calculation (weighted)	¥	2,178
Net cash outflows (weighted)		1,552
LCR		140	.5%

For more information on LCR, see “Item 4. Information on the Company—Supervision and Regulation—Liquidity” in our most recent Form 20-F.

Capital Adequacy

All yen figures and percentages in this subsection are truncated. Accordingly, the total of each column of figures may not be equal to the total of the individual items.

Regulatory Capital Requirements

Mizuho Financial Group and its principal banking subsidiaries are subject to regulatory capital requirements administered by the Financial Services Agency in accordance with the provisions of the Banking Act and related regulations. Failure to meet minimum capital requirements may initiate certain mandatory actions by regulators that, if undertaken, could have a direct material effect on our financial condition and results of operations.

The capital adequacy guidelines applicable to Japanese banks and bank holding companies with international operations supervised by the Financial Services Agency closely follow the risk-adjusted approach proposed by the Bank for International Settlements (“BIS”) and are intended to further strengthen the soundness and stability of Japanese banks. Effective March 31, 2007, guidelines were implemented by the Financial Services Agency to comply with the capital adequacy requirements set by BIS called Basel II. The framework of Basel II is based on the following three pillars: minimum capital requirements; supervisory review; and market discipline.

In May 2011, the capital adequacy guidelines were revised by the Financial Services Agency to comply with the package of measures to enhance the Basel II framework approved by the Basel Committee on Banking Supervision in July 2009. The revised guidelines, which became effective in December 2011, include the strengthening of rules governing trading book capital and the strengthening of treatment of certain securitizations under the first pillar.

In December 2010, the Basel Committee on Banking Supervision issued the Basel III rules text (later revised in June 2011, January 2013 and October 2014), which presents the details of global regulatory standards on bank capital adequacy and liquidity agreed by the Governors and Heads of Supervision, which is the oversight body of the Basel Committee on Banking Supervision, and endorsed by the G20 Leaders at the Seoul summit in November 2010. The rules text sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, the introduction of capital conservation buffer and countercyclical capital buffer as measures to promote the build-up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards. The Financial Services Agency’s revisions to its capital adequacy guidelines became effective from March 31, 2013, which generally reflect rules in the Basel III rules text that have been applied from January 1, 2013. While the three-pillar structure of Basel II has been retained, Basel III includes various changes.

Under the first pillar, the capital ratio is calculated by dividing regulatory capital, or risk-based capital, by risk-weighted assets. With respect to the calculation of risk-weighted assets, we adopt the advanced internal ratings-based approach for credit risk. Under such approach, balance sheet assets and off-balance-sheet exposures, calculated under Japanese GAAP, are assessed to risk components such as probability of default and loss given default, which are derived from our own internal credit experience. In addition to credit risk, banks are required to measure and apply capital charges with respect to their market risks. Market risk is defined as the risk of losses in on- and off-balance-sheet positions arising from movements in market prices. Operational risk, which was introduced under Basel II with respect to regulatory capital requirements, is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. We adopt the advanced measurement approach for the measurement of operational risk equivalent by taking account of the following four elements: internal loss data; external loss data; scenario analysis; and business environment and internal control factors. Under Basel III, the calculation method of risk-weighted assets was revised, including certain modifications to the treatment of counterparty credit risk, such as a capital charge for credit valuation adjustment risk.

With regard to risk-based capital, the guidelines based on Basel III set out higher and better-quality capital standards compared to those under Basel II. The guidelines based on Basel III require a target minimum standard capital adequacy ratio of 8%, Tier 1 capital ratio of 6% and Common Equity Tier 1 capital ratio of 4.5%, on both a consolidated and non-consolidated basis for banks with international operations, such as Mizuho Bank and Mizuho Trust & Banking, or on a consolidated basis for bank holding companies with international operations, such as Mizuho Financial Group.

The Leverage Ratio framework is critical and complementary to the risk-based capital framework that will help ensure broad and adequate capture of both on- and off-balance sheet sources of banks’ leverage. This simple, non-risk-based measure is intended to restrict the build-up of excessive leverage in the banking sector to avoid destabilizing deleveraging processes that can damage the broader financial system and the economy. Implementation of the leverage ratio requirements began with bank-level reporting to national supervisors of the leverage ratio and its components, and a public disclosure is required from January 2015. Basel III’s leverage ratio is defined as the “capital measure” (numerator) divided by the “exposure measure” (denominator) and is expressed as a percentage. The capital measure is currently defined as Tier 1 capital and the minimum leverage ratio is currently defined as 3%. The Basel Committee will monitor banks’ leverage ratio data in order to assess whether the design and calibration of a minimum Tier 1 leverage ratio of 3% is appropriate. Any final adjustments to the definition and calibration of the leverage ratio will be made by 2017, with a view to migrate to a Pillar 1 (minimum capital requirements) treatment on January 1, 2018, based on appropriate review and calibration.

In November 2011, the Financial Stability Board published policy measures to address the systemic and moral hazard risks associated with systemically important financial institutions. The policy measures include requirements for global systemically important banks (“G-SIBs”) to have additional loss absorption capacity tailored to the impact of their default, ranging from 1% to 2.5% of risk-weighted assets, to be met with Common Equity Tier 1 capital, which would be in addition to the 7.0% Common Equity Tier 1 capital requirement (including capital conservation buffer). The requirements began phasing in starting in January 2016 with full implementation by January 2019. We were included in the list of G-SIBs updated in November 2015 and were allocated to the bucket that would require 1.0% of additional loss absorbency.

In November 2015, the Financial Services Agency published the revised capital adequacy guidelines to introduce the Basel III rules text regarding the capital conservation buffer, the countercyclical capital buffer and the additional loss absorption capacity requirement for G-SIBs and domestic systemically important banks (“D-SIBs”). These guidelines will become effective on March 31, 2016. The capital conservation buffer, the countercyclical capital buffer and the additional loss absorption capacity requirement for G-SIBs and D-SIBs must be met with Common Equity Tier1 capital under the revised guidelines, and if such buffer and requirement are not satisfied, a capital distribution constraints plan is required to be submitted to the Financial Services Agency and carried out. The capital conservation buffer will be phased in starting in March 2016 at 0.625% until becoming fully effective in March 2019 at 2.5%. In addition, subject to national discretion by the respective regulatory authorities, if the relevant national authority judges a period of excess credit growth to be leading to the build-up of system-wide risk, a countercyclical capital buffer ranging from 0% to 2.5% would also be imposed on banking organizations. The countercyclical capital buffer will be a weighted average of the buffers deployed across all the jurisdictions to which the banking organization has credit exposures.

In December 2015, the Financial Services Agency published a capital adequacy guideline regarding the designation of G-SIBs and D-SIBs in Japan. We were designated as both a G-SIB and D-SIB, and the additional loss absorption capacity requirement applied to us was 1.0%. The additional loss absorption capacity requirement was the same as that imposed by the Financial Stability Board, which will be phased in starting in March 2016 at 0.25% until becoming fully effective in March 2019 at 1.0%.

Related to regulatory capital requirements, in November 2015, the Financial Stability Board issued the final total loss-absorbing capacity (“TLAC”) standard for G-SIBs. The TLAC standard has been designed so that failing G-SIBs will have sufficient loss-absorbing and recapitalization capacity available in resolution for

authorities to implement an orderly resolution. G-SIBs will be required to meet the TLAC requirement alongside the minimum regulatory requirements set out in the Basel III framework. Specifically, G-SIBs will be required to meet a Minimum TLAC requirement of at least 16% of the resolution group’s risk-weighted assets as from January 1, 2019 and at least 18% as from January 1, 2022. Minimum TLAC must also be at least 6% of the Basel III leverage ratio denominator as from January 1, 2019, and at least 6.75% as from January 1, 2022.

Japanese banks are also required to comply with the supervisory review process (second pillar) and disclosure requirements for market discipline (third pillar). Under the second pillar, banks are required to maintain adequate capital to support all of the major risks in their business and are encouraged to develop and use better risk management techniques in monitoring and managing such risks. Under the third pillar, banks are required to enhance disclosure, including disclosure of details of the capital adequacy ratio, the amount of each type of risk and the method of calculation used so that the market may make more effective evaluations. Further, the revisions to the Financial Services Agency’s guidelines relating to the third pillar, which reflect the enhanced disclosure requirements under Basel III and became effective on March 31, 2013, require banks to disclose, among other things, the components of their regulatory capital and the main features of their regulatory capital instruments in common templates.

Unless otherwise specified, the regulatory capital information set forth in this “—Capital Adequacy” is based on the current Basel III rules.

Consolidated Capital Adequacy Ratios

Our capital adequacy ratios as of March 31, 2015 and September 30, 2015, calculated in accordance with Japanese GAAP and the guidelines established by the Financial Services Agency, were as set forth in the following table:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
	(in billions of yen, except percentages)
Common Equity Tier 1 capital	¥	6,153.1		¥	6,338.8		¥	185.6
Additional Tier 1 capital		1,347.2			1,403.5			56.3

Tier 1 capital		7,500.3			7,742.3			241.9
Tier 2 capital		2,008.1			1,853.7			(154.3	)

Total capital	¥	9,508.4		¥	9,596.1		¥	87.6

Risk-weighted assets	¥	65,191.9		¥	62,309.2		¥	(2,882.6	)
Common Equity Tier 1 capital ratio		9.43	%		10.17	%		0.74	%
Required Common Equity Tier 1 capital ratio		4.50			4.50			—
Tier 1 capital ratio		11.50			12.42			0.92
Required Tier 1 capital ratio		6.00			6.00			—
Total capital ratio		14.58			15.40			0.82
Required total capital ratio		8.00			8.00			—
Leverage ratio⁽¹⁾		3.83			3.89			0.06

Note:

(1)	Due to an implementation of the leverage ratio requirements in Japan, public disclosure of the leverage ratio is required from March 31, 2015. Any final adjustments to the definition and calibration of the leverage ratio will be made by the Basel Committee on Banking Supervision by 2017.

Our total capital ratio as of September 30, 2015 was 15.40%, an increase of 0.82% compared to March 31, 2015. Our Tier 1 capital ratio as of September 30, 2015 was 12.42%, an increase of 0.92% compared to March 31, 2015. Our Common Equity Tier 1 capital ratio as of September 30, 2015 was 10.17%, an increase of

0.74% compared to March 31, 2015. The increases in each ratio were due mainly to a decrease in risk-weighted assets and to an increase in Common Equity Tier 1 capital. We believe that we were in compliance with all capital adequacy requirements to which we were subject as of September 30, 2015.

Capital

The following table shows a breakdown of our total risk-based capital as of March 31, 2015 and September 30, 2015:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
	(in billions of yen)
Common Equity Tier 1 capital	¥	6,153.1		¥	6,338.8		¥	185.6
Capital and stock surplus		3,152.2			3,223.1			70.8
Retained earnings		2,768.5			3,004.1			235.6
Treasury stock		(3.6	)		(4.0	)		(0.4	)
Earnings to be distributed		(100.5	)		(94.6	)		5.9
Subscription rights to common shares		3.8			2.7			(1.0	)
Accumulated other comprehensive income and other disclosed reserves		811.9			683.1			(128.8	)
Common share capital issued by subsidiaries and held by third parties		12.1			11.7			(0.3	)
Instruments and reserves subject to phase-out arrangements		49.1			52.3			3.2
Regulatory adjustments		(540.4	)		(539.8	)		0.6
Additional Tier 1 capital^{(1)(2) (3)}		1,347.2			1,403.5			56.3
Directly issued qualifying Additional Tier 1 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards		—			300.0			300.0
Additional Tier 1 instruments issued by subsidiaries and held by third parties		29.5			29.1			(0.4	)
Eligible Tier 1 capital instruments subject to phase-out arrangements⁽¹⁾⁽²⁾		1,458.1			1,193.5			(264.6	)
Instruments subject to phase-out arrangements		(24.2	)		(26.2	)		(1.9	)
Regulatory adjustments		(116.3	)		(92.8	)		23.4

Tier 1 capital^{(1)(2) (3)}		7,500.3			7,742.3			241.9

Tier 2 capital⁽⁴⁾		2,008.1			1,853.7			(154.3	)
Directly issued qualifying Tier 2 instruments plus related stock surplus of which: classified as liabilities under applicable accounting standards		150.0			200.0			50.0
Tier 2 instruments plus related stock surplus issued by special purpose vehicles and other equivalent entities		180.4			179.9			(0.4	)
Tier 2 instruments issued by subsidiaries and held by third parties		9.2			9.1			—
Eligible Tier 2 capital instruments subject to phase-out arrangements		1,108.8			1,031.8			(76.9	)
General allowance for loan losses and eligible provisions included in Tier 2		4.6			5.3			0.7
Instruments and provisions subject to phase-out arrangements		730.7			595.9			(134.7	)
Regulatory adjustments		(175.7	)		(168.5	)		7.2

Total capital^(1)(2)(3)(4)	¥	9,508.4		¥	9,596.1		¥	87.6

Notes:

(1)

As of September 30, 2015, the outstanding balance of our eleventh series class XI preferred stock was ¥144.0 billion. During the period from October 1, 2015 to December 31, 2015, holders of the preferred stock converted 1,868,000 shares (or ¥1.8 billion) by requesting us to acquire the preferred stock and issue common stock to them.

(2)	We redeemed ¥452.5 billion of non-dilutive preferred securities in June 2015.

(3)	In July 2015, we issued ¥300.0 billion of perpetual subordinated bonds with optional-redemption clause and write-down clause that are Basel III-eligible Additional Tier 1 capital instruments to qualified institutional investors in Japan.

(4)	In October 2015, we issued $750.0 million of dated subordinated bonds with a write-down feature that are Basel III-eligible Tier 2 capital instruments to overseas wholesale investors.

Our Common Equity Tier 1 capital increased by ¥185.6 billion from ¥6,153.1 billion as of March 31, 2015 to ¥6,338.8 billion as of September 30, 2015. The increase was due mainly to an increase in retained earnings as a result of recording net income for the six months ended September 30, 2015, offset in part by a decrease in accumulated other comprehensive income. Our Additional Tier 1 capital increased by ¥56.3 billion from ¥1,347.2 billion as of March 31, 2015 to ¥1,403.5 billion as of September 30, 2015. The increase was due mainly to the issuance of perpetual subordinated bonds, offset in part by the redemption of non-dilutive preferred securities subject to phase-out arrangements. As a result, our Tier 1 capital increased by ¥241.9 billion from ¥7,500.3 billion as of March 31, 2015 to ¥7,742.3 billion as of September 30, 2015.

Non-dilutive preferred securities issued by our overseas special purpose companies to investors are included within Additional Tier 1 capital and subject to phase-out arrangements. As of September 30, 2015, the outstanding balance of these securities was ¥1,049.4 billion. Although such non-dilutive preferred securities are perpetual in term, they are redeemable at our option, subject to prior approval from regulatory authorities, on, and on specified dates after, the relevant initial optional redemption date. The following table shows the initial optional redemption dates for the non-dilutive preferred securities included within our Additional Tier 1 capital as of September 30, 2015 and the total outstanding balance of non-dilutive preferred securities with each such initial optional redemption date. The non-dilutive preferred securities are denominated in yen, unless otherwise noted.


Initial optional redemption date	Outstanding balance of non-dilutive preferred securities included within Additional Tier 1 capital
	(in billions of yen)
June 2016	¥	471.9	⁽¹⁾
June 2018		274.5
June 2019		303.0

Note:

(1)	Denominated in yen (¥400.0 billion) and dollars ($600.0 million).

Our Tier 2 capital as of September 30, 2015 was ¥1,853.7 billion, a decrease of ¥154.3 billion compared to March 31, 2015. The decrease was due mainly to a decrease in unrealized gains on other securities and the effect of amortization of the existing eligible Tier 2 capital instruments subject to phase-out arrangements, offset in part by the issuance of dated subordinated bonds.

As a result of the above, total capital as of September 30, 2015 was ¥9,596.1 billion, an increase of ¥87.6 billion compared to March 31, 2015.

Risk-weighted Assets

The following table shows a breakdown of our risk-weighted assets as of March 31, 2015 and September 30, 2015:


	As of
	March 31, 2015		September 30, 2015		Increase (decrease)
	(in billions of yen)
Risk-weighted assets:
Credit risk assets	¥	58,602.7	¥	57,249.5	¥	(1,353.2	)
Market risk equivalent assets		3,473.8		1,982.7		(1,491.0	)
Operational risk equivalent assets		3,115.3		3,076.9		(38.3	)

Total	¥	65,191.9	¥	62,309.2	¥	(2,882.6	)

Risk-weighted assets as of September 30, 2015 were ¥62,309.2 billion, a decrease of ¥2,882.6 billion compared to March 31, 2015. Credit risk assets decreased by ¥1,353.2 billion to ¥57,249.5 billion due mainly to a decline in stock prices in Japan. Market risk equivalent assets decreased by ¥1,491.0 billion to ¥1,982.7 billion due mainly to a reduction of our foreign exchange position. Operational risk equivalent assets decreased by ¥38.3 billion to ¥3,076.9 billion.

Principal Banking Subsidiaries

Capital adequacy ratios of our principal banking subsidiaries, on a consolidated basis, as of March 31, 2015 and September 30, 2015, calculated in accordance with Japanese GAAP and the guidelines established by the Financial Services Agency, were as set forth in the following table:


	As of						Increase (decrease)
	March 31, 2015			September 30, 2015			Increase (decrease)
Mizuho Bank
Common Equity Tier 1 capital ratio		10.42	%		10.83	%		0.41	%
Tier 1 capital ratio		12.13			13.06			0.93
Total capital ratio		15.30			16.01			0.71
Mizuho Trust & Banking
Common Equity Tier 1 capital ratio		16.67			19.06			2.39
Tier 1 capital ratio		16.68			19.10			2.42
Total capital ratio		19.21			21.13			1.92

We believe each of our principal banking subsidiaries was in compliance with all capital adequacy requirements to which it was subject as of September 30, 2015.

Our securities subsidiaries in Japan are also subject to the capital adequacy requirement under the Financial Instruments and Exchange Act. Failure to maintain a minimum capital ratio will trigger mandatory regulatory actions. We believe, as of September 30, 2015, that our securities subsidiaries in Japan were in compliance with all capital adequacy requirements to which they were subject.

Off-balance-sheet Arrangements

See note 15 “Commitments and contingencies” and note 16 “Variable interest entities and securitizations” to our consolidated financial statements included elsewhere in this report.

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)


	March 31, 2015			September 30, 2015
	(in millions of yen)
Assets:
Cash and due from banks		1,528,306			1,510,362
Interest-bearing deposits in other banks		27,852,853			33,976,568
Call loans and funds sold		444,115			455,393
Receivables under resale agreements (Note 18)		8,582,026			8,618,215
Receivables under securities borrowing transactions (Note 18)		4,059,341			3,900,412
Trading account assets (including assets pledged that secured parties are permitted to sell or repledge of ¥7,645,031 million at March 31, 2015 and ¥7,688,415 million at September 30, 2015) (Notes 17 and 18)		29,416,024			28,696,421
Investments (Notes 3 and 17):
Available-for-sale securities (including assets pledged that secured parties are permitted to sell or repledge of ¥776,660 million at March 31, 2015 and ¥996,503 million at September 30, 2015)		27,070,710			24,927,095
Held-to-maturity securities (including assets pledged that secured parties are permitted to sell or repledge of ¥1,272,433 million at March 31, 2015 and ¥1,267,048 million at September 30, 2015)		5,647,341			5,252,214
Other investments		697,687			595,452
Loans (Notes 4, 5 and 17)		78,048,276			78,257,413
Allowance for loan losses		(520,259	)		(465,038	)

Loans, net of allowance		77,528,017			77,792,375
Premises and equipment—net		1,632,485			1,737,468
Due from customers on acceptances		139,011			177,461
Accrued income		280,010			267,549
Goodwill		11,703			10,646
Intangible assets		53,580			51,106
Deferred tax assets		57,921			56,820
Other assets (Notes 4, 6, 14 and 17)		5,118,604			4,311,938

Total assets		190,119,734			192,337,495

The following table presents the assets of consolidated variable interest entities (“VIE”s), which are included in the consolidated balance sheets above. The assets in the table below can be used only to settle obligations of consolidated VIEs.


	March 31, 2015		September 30, 2015
	(in millions of yen)
Assets of consolidated VIEs:
Cash and due from banks		79,408		37,334
Interest-bearing deposits in other banks		12,267		74,684
Trading account assets		1,877,877		1,786,828
Investments		47,505		34,644
Loans, net of allowance		2,817,142		2,408,444
Other		1,050,504		692,607

Total assets		5,884,703		5,034,541

See the accompanying Notes to the Consolidated Financial Statements.

F-1

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)—(Continued)


	March 31, 2015			September 30, 2015
	(in millions of yen)
Liabilities and equity:
Deposits:
Domestic:
Noninterest-bearing deposits		13,576,340			13,945,206
Interest-bearing deposits		78,187,584			79,323,379
Foreign:
Noninterest-bearing deposits		1,358,121			1,527,207
Interest-bearing deposits		21,084,396			21,803,043
Due to trust accounts		1,241,101			1,396,519
Call money and funds purchased		5,091,198			5,738,107
Payables under repurchase agreements (Notes 18 and 19)		19,612,021			19,677,143
Payables under securities lending transactions (Notes 18 and 19)		2,462,315			2,349,266
Other short-term borrowings		1,582,597			1,908,998
Trading account liabilities (Notes 17 and 18)		16,471,857			15,716,931
Bank acceptances outstanding		139,011			177,461
Income taxes payable		158,748			106,436
Deferred tax liabilities		293,956			200,301
Accrued expenses		153,541			156,477
Long-term debt (including liabilities accounted for at fair value of ¥739,727 million at March 31, 2015 and ¥722,352 million at September 30, 2015) (Note 17)		14,582,241			14,583,735
Other liabilities (Notes 6, 14 and 17)		5,934,863			5,588,839

Total liabilities		181,929,890			184,199,048

Commitments and contingencies (Note 15)

Equity:
MHFG shareholders’ equity:
Preferred stock (Note 7)		213,121			144,073
Common stock (Note 7)—no par value, authorized 48,000,000,000 shares at March 31, 2015 and September 30, 2015, and issued 24,621,897,967 shares at March 31, 2015, and 24,870,929,677 shares at September 30, 2015		5,590,396			5,659,240
Retained earnings		89,432			354,721
Accumulated other comprehensive income, net of tax (Note 9)		2,041,005			1,744,935
Less: Treasury stock, at cost—Common stock 11,649,262 shares at March 31, 2015, and 12,395,841 shares at September 30, 2015		(3,616	)		(4,031	)

Total MHFG shareholders’ equity		7,930,338			7,898,938
Noncontrolling interests		259,506			239,509

Total equity		8,189,844			8,138,447

Total liabilities and equity		190,119,734			192,337,495

The following table presents the liabilities of consolidated VIEs, which are included in the consolidated balance sheets above. The creditors or investors of the consolidated VIEs have no recourse to the MHFG Group, except where the Group provides credit enhancement through guarantees or other means.


	March 31, 2015		September 30, 2015
	(in millions of yen)
Liabilities of consolidated VIEs:
Other short-term borrowings		311,334		309,288
Trading account liabilities		2,293		36
Long-term debt		250,448		290,138
Other		1,492,914		1,047,079

Total liabilities		2,056,989		1,646,541

See the accompanying Notes to the Consolidated Financial Statements.

F-2

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)


	Six months ended September 30,
	2014			2015
	(in millions of yen)
Interest and dividend income:
Loans, including fees		484,812			510,782
Investments:
Interest		67,476			54,785
Dividends		34,515			39,287
Trading account assets		76,501			71,701
Call loans and funds sold		4,153			3,460
Receivables under resale agreements and securities borrowing transactions		15,103			22,211
Deposits		23,424			31,382

Total interest and dividend income		705,984			733,608

Interest expense:
Deposits		70,703			96,334
Trading account liabilities		15,968			11,163
Call money and funds purchased		3,715			3,897
Payables under repurchase agreements and securities lending transactions		16,811			25,808
Other short-term borrowings		4,263			2,788
Long-term debt		87,519			87,963

Total interest expense		198,979			227,953

Net interest income		507,005			505,655
Provision (credit) for loan losses (Notes 4 and 5)		(91,561	)		3,030

Net interest income after provision (credit) for loan losses		598,566			502,625

Noninterest income:
Fee and commission income		332,228			365,411
Foreign exchange gains (losses)—net		(6,126	)		47,938
Trading account gains (losses)—net		288,022			149,142
Investment gains (losses)—net (Note 3)		101,291			149,312
Equity in earnings (losses) of equity method investees—net		18,331			20,151
Gains on disposal of premises and equipment		1,862			8,756
Other noninterest income (Note 14)		67,826			113,386

Total noninterest income		803,434			854,096

Noninterest expenses:
Salaries and employee benefits (Note 13)		292,617			315,826
General and administrative expenses		249,589			268,901
Occupancy expenses		92,519			100,777
Fee and commission expenses		70,119			77,303
Provision (credit) for losses on off-balance-sheet instruments		(8,005	)		(9,324	)
Other noninterest expenses (Note 14)		77,170			60,708

Total noninterest expenses		774,009			814,191

Income before income tax expense		627,991			542,530
Income tax expense (Note 12)		219,999			167,261

Net income		407,992			375,269
Less: Net income attributable to noncontrolling interests		4,187			9,396

Net income attributable to MHFG shareholders		403,805			365,873


	(in yen)
Earnings per common share (Note 11):
Basic net income per common share		16.52			14.74

Diluted net income per common share		15.91			14.41

See the accompanying Notes to the Consolidated Financial Statements.

F-3

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)


	Six months ended September 30,
	2014		2015
	(in millions of yen)
Net income		407,992		375,269
Other comprehensive income (loss), net of tax		295,766		(297,397	)

Total comprehensive income		703,758		77,872
Less: Total comprehensive income attributable to noncontrolling interests		2,869		8,069

Total comprehensive income attributable to MHFG shareholders		700,889		69,803

See the accompanying Notes to the Consolidated Financial Statements.

F-4

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)


	Six months ended September 30,
	2014			2015
	(in millions of yen)
Preferred stock (Note 7):
Balance at beginning of period		312,651			213,121
Conversion to common stock		(34,753	)		(69,048	)

Balance at end of period		277,898			144,073


Common stock (Note 7):
Balance at beginning of period		5,489,295			5,590,396
Issuance of new shares of common stock due to conversion of preferred stock		34,753			69,048
Issuance of new shares of common stock due to exercise of stock acquisition rights		863			772
Gains (losses) on disposal of treasury stock		67			82
Stock-based compensation		(1,155	)		(1,058	)
Change in ownership interest in consolidated subsidiaries		(4	)		—

Balance at end of period		5,523,819			5,659,240


Retained earnings (Accumulated deficit):
Balance at beginning of period		(537,479	)		89,432
Net income attributable to MHFG shareholders		403,805			365,873
Dividends declared		(88,013	)		(100,584	)

Balance at end of period		(221,687	)		354,721


Accumulated other comprehensive income, net of tax (Note 9):
Balance at beginning of period		1,117,877			2,041,005
Change during period		297,084			(296,070	)

Balance at end of period		1,414,961			1,744,935


Treasury stock, at cost:
Balance at beginning of period		(3,874	)		(3,616	)
Purchases of treasury stock		(265	)		(684	)
Disposal of treasury stock		299			269

Balance at end of period		(3,840	)		(4,031	)

Total MHFG shareholders’ equity		6,991,151			7,898,938


Noncontrolling interests:
Balance at beginning of period		242,901			259,506
Effect of other increase/decrease in consolidated subsidiaries		(41,978	)		(25,819	)
Dividends paid to noncontrolling interests		(2,472	)		(2,246	)
Net income attributable to noncontrolling interests		4,187			9,396
Net unrealized gains (losses) on available-for-sale securities attributable to noncontrolling interests		(1,248	)		(1,168	)
Foreign currency translation adjustments attributable to noncontrolling interests		(43	)		(146	)
Pension liability adjustments attributable to noncontrolling interests		(27	)		(14	)

Balance at end of period		201,320			239,509

Total equity		7,192,471			8,138,447

Note:

The amounts that have been reclassified out of Accumulated other comprehensive income, net of tax into net income are presented in Note 9 “Accumulated other comprehensive income”.

See the accompanying Notes to the Consolidated Financial Statements.

F-5

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Six months ended September 30,
	2014			2015
	(in millions of yen)
Cash flows from operating activities:
Net income		407,992			375,269
Less: Net income attributable to noncontrolling interests		4,187			9,396

Net income attributable to MHFG shareholders		403,805			365,873
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		81,609			82,608
Provision (credit) for loan losses		(91,561	)		3,030
Investment losses (gains)—net		(101,291	)		(149,312	)
Equity in losses (earnings) of equity method investees—net		(18,331	)		(20,151	)
Foreign exchange losses (gains)—net		130,154			(43,487	)
Deferred income tax expense		102,408			29,890
Net change in trading account assets		(3,728,775	)		1,249,754
Net change in trading account liabilities		2,634,788			(771,660	)
Net change in loans held for sale		5,297			(32,588	)
Net change in accrued income		16,310			11,601
Net change in accrued expenses		28,358			(48,749	)
Other—net		(365,881	)		385,330

Net cash provided by (used in) operating activities		(903,110	)		1,062,139

Cash flows from investing activities:
Proceeds from sales of investments		36,100,383			10,581,839
Proceeds from maturities of investments		2,672,572			6,161,992
Purchases of investments		(39,697,918	)		(14,099,866	)
Proceeds from sales of loans		514,954			62,849
Net change in loans		(528,104	)		(1,141,961	)
Net change in interest-bearing deposits in other banks		(2,782,418	)		(6,148,274	)
Net change in call loans and funds sold, and receivables under resale agreements and securities borrowing transactions		(717,889	)		108,419
Proceeds from sales of premises and equipment		18,247			34,379
Purchases of premises and equipment		(102,521	)		(217,527	)

Net cash used in investing activities		(4,522,694	)		(4,658,150	)

Cash flows from financing activities:
Net change in deposits		5,128,125			2,563,948
Net change in call money and funds purchased, and payables under repurchase agreements and securities lending transactions		904,530			577,560
Net change in due to trust accounts		(30,430	)		155,418
Net change in other short-term borrowings		(1,957,532	)		333,078
Proceeds from issuance of long-term debt		2,507,188			1,326,988
Repayment of long-term debt		(1,273,521	)		(1,271,652	)
Proceeds from noncontrolling interests		528			283
Payment to noncontrolling interests		—			(5	)
Proceeds from issuance of common stock		6			5
Proceeds from sales of treasury stock		3			2
Purchases of treasury stock		(6	)		(8	)
Dividends paid		(88,147	)		(100,659	)
Dividends paid to noncontrolling interests		(2,472	)		(2,246	)

Net cash provided by financing activities		5,188,272			3,582,712

Effect of exchange rate changes on cash and due from banks		5,095			(4,645	)

Net decrease in cash and due from banks		(232,437	)		(17,944	)
Cash and due from banks at beginning of period		1,696,879			1,528,306

Cash and due from banks at end of period		1,464,442			1,510,362

Supplemental disclosure of cash flow information:
Noncash investing activities:
Transfer of loans into other investments		2,399			63,420
Investment in capital leases		1,980			12,618

See the accompanying Notes to the Consolidated Financial Statements.

F-6

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of presentation

Mizuho Financial Group, Inc. (“MHFG”) is a joint stock corporation with limited liability under the laws of Japan. MHFG, through its subsidiaries (“the MHFG Group”, or “the Group”), provides domestic and international financial services in Japan and other countries. For a discussion of the Group’s segment information, see Note 20 “Business segment information”.

The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements are stated in Japanese yen, the currency of the country in which MHFG is incorporated and principally operates.

The accompanying consolidated financial statements include the accounts of MHFG and its subsidiaries. MHFG’s interim financial reporting period ends on September 30 and certain subsidiaries’ interim financial reporting period ends on June 30. The necessary adjustments have been made to the consolidated financial statements if significant transactions took place during the three-months periods. When determining whether to consolidate investee entities, the MHFG Group performed a careful analysis of the facts and circumstances of the particular relationships between the MHFG Group and the investee entities as well as the ownership of voting shares. The consolidated financial statements also include the accounts of the VIEs for which MHFG or its subsidiaries have been determined to be the primary beneficiary in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, “Consolidation” (“ASC 810”). All significant intercompany transactions and balances have been eliminated upon consolidation. The MHFG Group accounts for investments in entities over which it has significant influence by using the equity method of accounting. These investments are included in Other investments and the Group’s proportionate share of income or loss is included in Equity in earnings (losses) of equity method investees—net.

The unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto included in the annual financial statements for the fiscal year ended March 31, 2015.

Certain financial information that is normally included in annual financial statements prepared in accordance with U.S. GAAP, but is not required for interim reporting purposes, has been condensed or omitted.

Use of estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures. Specific areas, among others, requiring the application of management’s estimates and judgment include assumptions pertaining to the allowance for loan losses, allowance for losses on off-balance-sheet instruments, deferred tax assets, derivative financial instruments, investments and pension and other employee benefits. Actual results could differ from estimates and assumptions made.

2. Recently issued accounting pronouncements

Recently adopted accounting pronouncements

In June 2014, the FASB issued Accounting Standards Update (“ASU”) No.2014-11, “Transfers and Servicing (Topic 860)—Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures” (“ASU No.2014-11”). The ASU changes the accounting for repurchase-to-maturity transactions to secured borrowing accounting. For repurchase financing arrangements, the ASU requires separate accounting for a transfer of a financial asset

F-7

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. The ASU requires disclosures for certain transactions comprising (1) a transfer of a financial asset accounted for as a sale and (2) an agreement with the same transferee entered into in contemplation of the initial transfer that results in the transferor retaining substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. The ASU also requires an entity to disclose certain information, including risks related to collateral pledged, for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions that are accounted for as secured borrowings. The ASU is effective for the first interim or annual period beginning after December 15, 2014, except for interim disclosure requirements related to secured borrowings, which are effective for interim periods beginning after March 15, 2015. The adoption of ASU No.2014-11 did not have a material impact on the MHFG Group’s consolidated results of operations or financial condition.

Accounting pronouncements issued but not yet effective

In May 2014, the FASB issued ASU No.2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU No.2014-09”). The ASU provides comprehensive guidance in respect of revenue recognition, in convergence with International Financial Reporting Standards (“IFRS”), to improve financial reporting in U.S. GAAP by replacing the current complex guidance for recognizing revenue. The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU was effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. In August 2015, the FASB issued ASU No.2015-14, “Revenue from Contracts with Customers (Topic 606) —Deferral of the Effective Date” (“ASU No.2015-14”) to defer the effective date of ASU No.2014-09 by one year. Therefore, ASU No.2014-09 is effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The MHFG Group is currently evaluating the potential impact that the adoption of ASU No.2014-09 and ASU No.2015-14 will have on its consolidated results of operations and financial condition.

In November 2014, the FASB issued ASU No.2014-16, “Derivatives and Hedging (Topic 815)—Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU No.2014-16”). The ASU clarifies that an entity that issues or invests in a hybrid financial instrument should determine the nature of the host contract by considering the economic characteristics and risks of the entire hybrid financial instrument, including the embedded derivative feature that is being evaluated for bifurcation. The ASU also clarifies that an entity should assess the substance of the relevant terms and features in evaluating the nature of a host contract when considering how to weight those terms and features. Specifically, the assessment of the substance of the relevant terms and features should incorporate a consideration of (1) the characteristics of the terms and features themselves, (2) the circumstances under which the hybrid financial instrument was issued or acquired, and (3) the potential outcomes of the hybrid financial instrument, as well as the likelihood of those potential outcomes. The ASU is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The MHFG Group is currently evaluating the potential impact that the adoption of ASU No.2014-16 will have on its consolidated results of operations and financial condition.

In February 2015, the FASB issued ASU No.2015-02, “Consolidation (Topic 810)—Amendments to the Consolidation Analysis” (“ASU No.2015-02”). The ASU amends the following provisions about the current accounting for consolidation of certain legal entities: (1) modify the evaluation of whether limited partnerships

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(Unaudited)—(Continued)

and similar legal entities are VIEs or voting interest entities, (2) eliminate the presumption that a general partner should consolidate a limited partnership, (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The ASU is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2015, and may be applied retrospectively or applied using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. Early adoption is permitted including adoption in an interim period. The MHFG Group is currently evaluating the potential impact that the adoption of ASU No.2015-02 will have on its consolidated results of operations and financial condition.

In April 2015, the FASB issued ASU No.2015-03, “Interest—Imputation of Interest (Subtopic 835-30)—Simplifying the Presentation of Debt Issuance Costs” (“ASU No.2015-03”). The ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The ASU is effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years, and should be applied retrospectively. Early adoption is permitted for financial statements that have not been previously issued. The MHFG Group does not expect that the adoption of ASU No.2015-03 will have a material impact on its consolidated results of operations or financial condition.

In May 2015, the FASB issued ASU No.2015-07, “Fair Value Measurement (Topic 820)—Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)” (“ASU No.2015-07”). The ASU removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The ASU also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years, and should be applied retrospectively to all periods presented. Earlier application is permitted. The MHFG Group does not expect that the adoption of ASU No.2015-07 will have a material impact on its consolidated results of operations or financial condition.

In January 2016, the FASB issued ASU No.2016-01, “Financial Instruments—Overall (Subtopic 825-10) —Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU No.2016-01”). The ASU amends the following provisions for the purpose of making targeted improvements to U.S. GAAP: (1) require equity investments to be measured at fair value with changes in fair value recognized in net income, (2) simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (3) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet, (4) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (5) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements, and (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The ASU is effective for fiscal years beginning after

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

December 15, 2017, and interim periods within those fiscal years, and should be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Early application by public business entities is permitted for financial statements of fiscal years or interim periods that have not yet been issued. The MHFG Group is currently evaluating the potential impact that the adoption of ASU No.2016-01 will have on its consolidated results of operations and financial condition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

3. Investments

Available-for-sale and held-to-maturity securities

The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity securities at March 31, 2015 and September 30, 2015 are as follows:


	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
	(in millions of yen)
March 31, 2015
Available-for-sale securities:
Debt securities:
Japanese government bonds		17,391,144		25,110		2,587		17,413,667
Japanese local government bonds		234,421		4,183		16		238,588
U.S. Treasury bonds and federal agency securities		116,408		1,259		454		117,213
Other foreign government bonds		961,684		4,437		237		965,884
Agency mortgage-backed securities ⁽¹⁾		806,877		17,280		2,427		821,730
Residential mortgage-backed securities		260,456		4,426		1,408		263,474
Commercial mortgage-backed securities		169,342		889		961		169,270
Japanese corporate bonds and other debt securities ⁽²⁾		1,930,054		13,366		1,496		1,941,924
Foreign corporate bonds and other debt securities ⁽³⁾		730,910		12,026		1,133		741,803
Equity securities (marketable)		1,697,628		2,700,714		1,185		4,397,157

Total		24,298,924		2,783,690		11,904		27,070,710

Held-to-maturity securities:
Debt securities:
Japanese government bonds		4,360,126		29,001		173		4,388,954
Agency mortgage-backed securities⁽⁴⁾		1,287,215		2,259		621		1,288,853

Total		5,647,341		31,260		794		5,677,807


September 30, 2015
Available-for-sale securities:
Debt securities:
Japanese government bonds		15,572,189		24,418		1,904		15,594,703
Japanese local government bonds		220,819		4,338		9		225,148
U.S. Treasury bonds and federal agency securities		81,856		31		405		81,482
Other foreign government bonds		1,013,504		3,543		93		1,016,954
Agency mortgage-backed securities ⁽¹⁾		880,064		11,978		2,633		889,409
Residential mortgage-backed securities		228,569		3,754		1,154		231,169
Commercial mortgage-backed securities		182,787		803		630		182,960
Japanese corporate bonds and other debt securities ⁽²⁾		1,997,042		20,465		742		2,016,765
Foreign corporate bonds and other debt securities ⁽³⁾		752,538		9,374		1,246		760,666
Equity securities (marketable)		1,599,323		2,351,382		22,866		3,927,839

Total		22,528,691		2,430,086		31,682		24,927,095

Held-to-maturity securities:
Debt securities:
Japanese government bonds		4,060,069		32,954		—		4,093,023
Agency mortgage-backed securities⁽⁴⁾		1,192,145		1,241		6,632		1,186,754

Total		5,252,214		34,195		6,632		5,279,777

Notes:

(1)

Agency mortgage-backed securities presented in the above table consist of U.S. agency securities and Japanese agency securities, of which the fair values were ¥87,327 million and ¥734,403 million, respectively, at March 31, 2015, and ¥103,001 million and ¥786,408 million, respectively, at September 30, 2015. U.S. agency securities primarily consist of Government National Mortgage Association (“Ginnie Mae”) securities, which are guaranteed by the United States government. All Japanese agency securities are mortgage-backed securities issued by Japan Housing Finance Agency, a Japanese government-sponsored enterprise.

(2)	Other debt securities presented in the above table primarily consist of certificates of deposit (“CDs”) and asset-backed securities (“ABS”), of which the total fair values were ¥165,602 million at March 31, 2015, and ¥173,891 million at September 30, 2015.

(3)	Other debt securities presented in the above table primarily consist of CDs, ABS, and collateralized loan obligations (“CLO”), of which the total fair values were ¥142,543 million at March 31, 2015, and ¥118,506 million at September 30, 2015.

(4)	All Agency mortgage-backed securities presented in the above table are Ginnie Mae securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Contractual maturities

The amortized cost and fair value of available-for-sale and held-to-maturity debt securities at September 30, 2015 by contractual maturity are shown in the table below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities not due at a single maturity date and securities embedded with call or prepayment options, such as mortgage-backed securities, are included in the table below based on their contractual maturities.


Amortized cost	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Total
	(in millions of yen)
Available-for-sale securities:
Debt securities:
Japanese government bonds		1,529,414		12,934,674		1,108,101		—		15,572,189
Japanese local government bonds		21,390		104,962		93,758		709		220,819
U.S. Treasury bonds and federal agency securities		16,408		6,126		42,826		16,496		81,856
Other foreign government bonds		787,368		213,441		12,695		—		1,013,504
Agency mortgage-backed securities		—		—		—		880,064		880,064
Residential mortgage-backed securities		—		—		—		228,569		228,569
Commercial mortgage-backed securities		3,910		124,069		54,808		—		182,787
Japanese corporate bonds and other debt securities		435,268		1,127,832		296,678		137,264		1,997,042
Foreign corporate bonds and other debt securities		234,976		446,473		69,207		1,882		752,538

Total		3,028,734		14,957,577		1,678,073		1,264,984		20,929,368

Held-to-maturity securities:
Debt securities:
Japanese government bonds		600,018		2,980,212		479,839		—		4,060,069
Agency mortgage-backed securities		—		—		—		1,192,145		1,192,145

Total		600,018		2,980,212		479,839		1,192,145		5,252,214


Fair value	Due in one year or less		Due after one year through five years		Due after five years through ten years		Due after ten years		Total
	(in millions of yen)
Available-for-sale securities:
Debt securities:
Japanese government bonds		1,529,435		12,950,999		1,114,269		—		15,594,703
Japanese local government bonds		21,405		106,061		96,853		829		225,148
U.S. Treasury bonds and federal agency securities		16,424		6,142		42,513		16,403		81,482
Other foreign government bonds		788,264		215,436		13,254		—		1,016,954
Agency mortgage-backed securities		—		—		—		889,409		889,409
Residential mortgage-backed securities		—		—		—		231,169		231,169
Commercial mortgage-backed securities		3,918		123,977		55,065		—		182,960
Japanese corporate bonds and other debt securities		435,651		1,132,347		300,072		148,695		2,016,765
Foreign corporate bonds and other debt securities		235,683		452,254		70,822		1,907		760,666

Total		3,030,780		14,987,216		1,692,848		1,288,412		20,999,256

Held-to-maturity securities:
Debt securities:
Japanese government bonds		601,440		2,993,928		497,655		—		4,093,023
Agency mortgage-backed securities		—		—		—		1,186,754		1,186,754

Total		601,440		2,993,928		497,655		1,186,754		5,279,777

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MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Other-than-temporary impairment

The MHFG Group performs periodic reviews to identify impaired securities in accordance with ASC 320, “Investments—Debt and Equity Securities” (“ASC 320”). For debt securities, in the cases where the MHFG Group has the intent to sell a debt security or more likely than not will be required to sell a debt security before the recovery of its amortized cost basis, the full amount of an other-than-temporary impairment loss is recognized immediately through earnings. In other cases, the MHFG Group evaluates expected cash flows to be received and determines if a credit loss exists, and if so, the amount of an other-than-temporary impairment related to the credit loss is recognized in earnings, while the remaining decline in fair value is recognized in other comprehensive income, net of applicable taxes. For equity securities, impairment is evaluated considering the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuers, as well as the MHFG Group’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value. If an equity security is deemed other-than-temporarily impaired, it shall be written down to fair value, with the full decline recognized in earnings.

The following table shows the other-than-temporary impairment on available-for-sale securities for the six months ended September 30, 2014 and 2015. No impairment losses were recognized on held-to-maturity securities for the periods.


	Six months ended September 30,
	2014		2015
	(in millions of yen)
Available-for-sale securities:
Debt securities		307		40
Equity securities		473		6,060

Total		780		6,100

For the six months ended September 30, 2015, the other-than-temporary impairment losses for debt securities were attributable to the decline in the fair value of Japanese corporate bonds that the MHFG Group determined that credit losses existed. In accordance with ASC 320-10-35-33A and ASC 320-10-35-34B, the other-than-temporary impairment of these securities was recognized in earnings. There has never been any instance related to credit losses recognized in earnings on debt securities where a portion of an other-than-temporary impairment was recognized in other comprehensive income.

The other-than-temporary impairment losses for equity securities were mainly attributable to the decline in the fair value of certain Japanese equity securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Continuous unrealized loss position

The following table shows the gross unrealized losses and fair value of available-for-sale and held-to-maturity securities, aggregated by the length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2015 and September 30, 2015:


	Less than 12 months				12 months or more				Total
	Fair value		Gross unrealized losses		Fair value		Gross unrealized losses		Fair value		Gross unrealized losses
	(in millions of yen)
March 31, 2015
Available-for-sale securities:
Debt securities:
Japanese government bonds		5,646,840		1,739		211,512		848		5,858,352		2,587
Japanese local government bonds		3,579		8		11,944		8		15,523		16
U.S. Treasury bonds and federal agency securities		45,858		454		—		—		45,858		454
Other foreign government bonds		127,535		204		10,421		33		137,956		237
Agency mortgage-backed securities ⁽¹⁾		7,968		47		86,973		2,380		94,941		2,427
Residential mortgage-backed securities		—		—		51,897		1,408		51,897		1,408
Commercial mortgage-backed securities		23,468		394		19,238		567		42,706		961
Japanese corporate bonds and other debt securities		270,877		478		54,615		1,018		325,492		1,496
Foreign corporate bonds and other debt securities		11,496		29		60,491		1,104		71,987		1,133
Equity securities (marketable)		11,325		1,156		150		29		11,475		1,185

Total		6,148,946		4,509		507,241		7,395		6,656,187		11,904

Held-to-maturity securities:
Debt securities:
Japanese government bonds		99,738		173		—		—		99,738		173
Agency mortgage-backed securities⁽²⁾		355,560		621		—		—		355,560		621

Total		455,298		794		—		—		455,298		794


September 30, 2015
Available-for-sale securities:
Debt securities:
Japanese government bonds		4,185,915		840		207,845		1,064		4,393,760		1,904
Japanese local government bonds		4,969		6		4,528		3		9,497		9
U.S. Treasury bonds and federal agency securities		58,917		405		—		—		58,917		405
Other foreign government bonds		146,453		69		287		24		146,740		93
Agency mortgage-backed securities ⁽¹⁾		87,445		178		78,039		2,455		165,484		2,633
Residential mortgage-backed securities		1,131		—		45,949		1,154		47,080		1,154
Commercial mortgage-backed securities		35,091		464		6,673		166		41,764		630
Japanese corporate bonds and other debt securities		321,235		280		113,363		462		434,598		742
Foreign corporate bonds and other debt securities		133,153		551		26,599		695		159,752		1,246
Equity securities (marketable)		174,815		22,822		114		44		174,929		22,866

Total		5,149,124		25,615		483,397		6,067		5,632,521		31,682

Held-to-maturity securities:
Debt securities:
Agency mortgage-backed securities ⁽²⁾		804,001		6,632		—		—		804,001		6,632

Total		804,001		6,632		—		—		804,001		6,632

Notes:

(1)

Agency mortgage-backed securities presented in the above table consist of U.S. agency securities and Japanese agency securities, of which the fair values were ¥86,973 million and ¥7,968 million, respectively, at March 31, 2015, and ¥90,377 million and ¥75,107 million, respectively, at September 30, 2015. U.S. agency securities primarily consist of Ginnie Mae securities, which are guaranteed by the United States government. All Japanese agency securities are mortgage-backed securities issued by Japan Housing Finance Agency, a Japanese government-sponsored enterprise.

(2)	All Agency mortgage-backed securities presented in the above table are Ginnie Mae securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

At September 30, 2015, the MHFG Group did not intend to sell the debt securities in an unrealized loss position and it was not more likely than not that the MHFG Group would be required to sell them before the recovery of their amortized cost bases. For Japanese government bonds, U.S. Treasury bonds and federal agency securities and Agency mortgage-backed securities, their entire amortized cost bases were expected to be recovered since the unrealized losses had not resulted from credit deterioration, but primarily from changes in interest rates. For the debt securities other than those described above, including Japanese corporate bonds with similar credit risks as the other-than-temporarily impaired securities, the MHFG Group determined that their entire amortized cost bases were expected to be recovered, after considering various factors such as the extent to which their fair values were below their amortized cost bases, the external and/or internal ratings and the present values of cash flows expected to be collected. Based on the evaluation above, the MHFG Group determined that the debt securities in an unrealized loss position were not considered other-than-temporarily impaired.

The equity securities in an unrealized loss position were determined not to be other-than-temporarily impaired based on the evaluation of the following factors: (1) the severity and duration of the impairments, (2) the financial condition and near-term prospects of the issuers, and (3) the MHFG Group’s ability and intent to hold these investments for a reasonable period of time sufficient for a forecasted recovery of fair value.

Realized gains and losses

The following table shows the realized gains and losses on sales of available-for-sale securities for the six months ended September 30, 2014 and 2015. See “Consolidated Statements of Cash Flows (Unaudited)” for the proceeds from sales of investments, the vast majority of which consists of the proceeds from sales of available-for-sale securities.


	Six months ended September 30,
	2014			2015
	(in millions of yen)
Gross realized gains		77,001			128,495
Gross realized losses		(2,550	)		(14,949	)

Net realized gains (losses) on sales of available-for-sale securities		74,451			113,546

Other investments

The following table summarizes the composition of Other investments at March 31, 2015 and September 30, 2015:


	March 31, 2015		September 30, 2015
	(in millions of yen)
Equity method investments		194,188		244,513
Investments held by consolidated investment companies		53,061		40,943
Other equity interests		450,438		309,996

Total		697,687		595,452

Equity method investments

Investments in investees over which the MHFG Group has the ability to exert significant influence are accounted for using the equity method of accounting. Such investments included marketable equity securities with carrying

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

values of ¥84,183 million and ¥128,105 million, at March 31, 2015 and September 30, 2015, respectively. The aggregate market values of these marketable equity securities were ¥121,198 million and ¥267,921 million, respectively.

The MHFG Group’s proportionate share of the total outstanding common shares in Orient Corporation as of September 30, 2015 was 49.0%.

Investments held by consolidated investment companies

The MHFG Group consolidates certain investment companies over which it has control through either ownership or other means. Investment companies are subject to specialized industry accounting which requires investments to be carried at fair value, with changes in fair value recorded in earnings. The MHFG Group maintains this specialized industry accounting for investments held by consolidated investment companies, which consist of marketable and non-marketable investments.

Other equity interests

Other equity interests primarily consist of non-marketable equity securities outside the scope of ASC 320, of which the fair values are not readily determinable, nor practicable to estimate. The MHFG Group has neither significant influence nor control over the investees. Each of these securities is stated at acquisition cost, with an other-than-temporary impairment, if any, included in earnings. The MHFG Group monitors the status of each investee, including its credit rating, to determine whether impairment losses should be recognized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

4. Loans

The table below presents loans outstanding by domicile and industry of borrower at March 31, 2015 and September 30, 2015:


	March 31, 2015		September 30, 2015
	(in millions of yen)
Domestic:
Manufacturing		8,224,361		8,306,951
Construction and real estate		7,353,826		7,539,111
Services		4,272,968		4,421,585
Wholesale and retail		5,586,533		5,510,203
Transportation and communications		3,156,855		3,111,558
Banks and other financial institutions		3,852,820		3,797,263
Government and public institutions		4,611,900		4,159,962
Other industries ^(Note)		5,079,922		4,760,673
Individuals:
Mortgage loans		11,021,956		10,844,100
Other		848,750		905,033

Total domestic		54,009,891		53,356,439

Foreign:
Commercial and industrial		16,688,090		16,912,194
Banks and other financial institutions		6,077,144		6,718,944
Government and public institutions		1,010,704		1,065,671
Other ^(Note)		425,862		373,042

Total foreign		24,201,800		25,069,851

Total		78,211,691		78,426,290
Less: Unearned income and deferred loan fees—net		163,415		168,877

Total loans before allowance for loan losses		78,048,276		78,257,413

Note:

Other industries of domestic and Other of foreign include trade receivables and lease receivables of consolidated VIEs.

Credit quality information

In accordance with the MHFG Group’s credit risk management policies, the Group uses an internal rating system that consists of credit ratings and pool allocations as the basis of its risk management infrastructure. Credit ratings consist of obligor ratings which represent the level of credit risk of the obligor, and transaction ratings which represent the ultimate possibility of incurring losses on individual loans by taking into consideration various factors such as collateral or guarantees involved. In principle, obligor ratings are applied to all obligors except those to which pool allocations are applied, and are subject to regular review at least once a year as well as special review which is required whenever the obligor’s credit standing changes. Pool allocations are applied to groups of small balance, homogeneous loans. The Group pools loans with similar risk characteristics, and the risk is assessed and managed according to such pools. The Group generally reviews the appropriateness and effectiveness of the approach to obligor ratings and pool allocations once a year in accordance with predetermined procedures.

F-17

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

The table below presents the MHFG Group’s definition of obligor ratings used by Mizuho Bank, Ltd. (“MHBK”) and Mizuho Trust & Banking Co., Ltd. (“MHTB”):


Obligor category	Obligor rating	Definition
Normal	A	Obligors whose certainty of debt fulfillment is very high, hence their level of credit risk is very low.
	B	Obligors whose certainty of debt fulfillment poses no problems for the foreseeable future, and their level of credit risk is low.
	C	Obligors whose certainty of debt fulfillment and their level of credit risk pose no problems for the foreseeable future.
	D	Obligors whose current certainty of debt fulfillment poses no problems, however, their resistance to future economic environmental changes is low.
Watch	E1	Obligors that require observation going forward because of either minor concerns regarding their financial position, or their somewhat weak or unstable business conditions.
	E2	Obligors that require special observation going forward because of problems with their borrowings such as reduced or suspended interest payments, problems with debt fulfillment such as failure to make principal or interest payments, or problems with their financial position as a result of their weak or unstable business condition.
Intensive control	F	Obligors that are not yet bankrupt but are in financial difficulties and are deemed likely to become bankrupt in the future because of insufficient progress in implementing their management improvement plans or other measures (including obligors that are receiving ongoing support from financial institutions).
Substantially bankrupt	G	Obligors that have not yet become legally or formally bankrupt but are substantially insolvent because they are in serious financial difficulties and are deemed to be incapable of being restructured.
Bankrupt	H	Obligors that have become legally or formally bankrupt.

F-18

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

The table below presents credit quality information of loans based on the MHFG Group’s internal rating system at March 31, 2015 and September 30, 2015:


	Normal obligors								Watch obligors excluding special attention obligors⁽¹⁾
	A-B		C-D		Retail⁽²⁾		Other⁽³⁾		E1-E2		Retail⁽²⁾		Other⁽³⁾		Impaired loans		Total
	(in millions of yen)
March 31, 2015
Domestic:
Manufacturing		4,663,535		2,607,651		109,615		198,621		147,978		16,424		1,019		479,518		8,224,361
Construction and real estate		3,331,659		2,943,178		600,856		165,660		192,124		18,478		562		101,309		7,353,826
Services		2,298,532		1,566,359		201,354		4,150		109,677		22,273		—		70,623		4,272,968
Wholesale and retail		2,261,669		2,695,642		237,050		53,691		148,722		39,189		65		150,505		5,586,533
Transportation and communications		2,310,918		674,273		89,258		422		36,383		10,029		—		35,572		3,156,855
Banks and other financial institutions		2,986,436		830,410		2,360		4,169		23,881		129		—		5,435		3,852,820
Government and public institutions		4,505,893		6,007		—		100,000		—		—		—		—		4,611,900
Other industries		2,018,620		706,882		3,326		2,290,419		10,476		406		49,213		580		5,079,922
Individuals		—		243,904		11,212,723		133,530		32,512		102,149		2,484		143,404		11,870,706

Total domestic		24,377,262		12,274,306		12,456,542		2,950,662		701,753		209,077		53,343		986,946		54,009,891

Foreign:
Total foreign		15,153,557		5,246,343		8,428		3,160,768		344,533		22		100,018		188,131		24,201,800

Total		39,530,819		17,520,649		12,464,970		6,111,430		1,046,286		209,099		153,361		1,175,077		78,211,691


September 30, 2015
Domestic:
Manufacturing		4,965,941		2,499,312		107,462		192,361		149,237		12,983		1,205		378,450		8,306,951
Construction and real estate		3,603,039		2,843,654		608,638		153,465		223,371		17,586		326		89,032		7,539,111
Services		2,474,556		1,540,858		195,391		4,941		108,763		25,134		—		71,942		4,421,585
Wholesale and retail		2,260,821		2,624,394		232,018		51,390		148,912		41,896		397		150,375		5,510,203
Transportation and communications		2,284,861		668,992		84,982		490		26,826		10,779		—		34,628		3,111,558
Banks and other financial institutions		2,952,153		810,356		2,202		3,824		21,819		220		—		6,689		3,797,263
Government and public institutions		4,083,955		6,007		—		70,000		—		—		—		—		4,159,962
Other industries		2,001,051		725,787		3,773		1,974,300		9,799		269		42,225		3,469		4,760,673
Individuals		—		251,067		11,105,930		121,754		34,625		101,120		1,602		133,035		11,749,133

Total domestic		24,626,377		11,970,427		12,340,396		2,572,525		723,352		209,987		45,755		867,620		53,356,439

Foreign:
Total foreign		15,873,382		5,335,168		8,707		3,203,607		340,367		20		104,474		204,126		25,069,851

Total		40,499,759		17,305,595		12,349,103		5,776,132		1,063,719		210,007		150,229		1,071,746		78,426,290

Notes:

(1)	Special attention obligors are watch obligors with debt in troubled debt restructuring (“TDR”) or 90 days or more delinquent debt. Loans to such obligors are considered impaired.

(2)	Amounts represent small balance, homogeneous loans which are subject to pool allocations.

(3)	Non-impaired loans held by subsidiaries other than MHBK and MHTB constitute Other, since their portfolio segments are not identical to those of MHBK and MHTB.

F-19

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Impaired loans

Loans are considered impaired when, based on current information and events, it is probable that the MHFG Group will be unable to collect all the scheduled payments of principal and interest when due according to the contractual terms of the loans. Factors considered by management in determining if a loan is impaired include delinquency status and the ability of the debtor to make payment of the principal and interest when due. The Group classifies loans to special attention, intensive control, substantially bankrupt and bankrupt obligors as impaired loans. Impaired loans include loans past due for 90 days or more and restructured loans that meet the definition of TDR in accordance with ASC 310, “Receivables” (“ASC 310”). The Group does not have any loans to borrowers that cause management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms for the periods presented other than those already designated as impaired loans.

All of the MHFG Group’s impaired loans are designated as nonaccrual loans and thus interest accruals and the amortization of net origination fees are suspended and capitalized interest is written off. Cash received on nonaccrual loans is accounted for as a reduction of the loan principal if the ultimate collectibility of the principal amount is uncertain, otherwise, as interest income. Loans are not restored to accrual status until interest and principal payments are current and future payments are reasonably assured. Impaired loans are restored to non-impaired loans and accrual status, when the MHFG Group determines that the borrower poses no concerns regarding current certainty of debt fulfillment. In general, such determination is made if the borrower qualifies for an obligor rating of E2 or above and is not classified as a special attention obligor. With respect to loans restructured in a TDR, in general, such loans are restored to non-impaired loans, and accrual status, when the borrower qualifies for an obligor rating of D or above. The table below presents impaired loans information at March 31, 2015 and September 30, 2015:


	Recorded investment⁽¹⁾
	Requiring an allowance for loan losses	Not requiring an allowance for loan losses ⁽²⁾	Total	Unpaid principal balance	Related allowance⁽³⁾	Average recorded investment	Interest income recognized ⁽⁴⁾
	(in millions of yen)
March 31, 2015
Domestic:
Manufacturing	469,856	9,662	479,518	487,833	170,864	289,807	9,376
Construction and real estate	77,863	23,446	101,309	119,800	17,479	119,325	1,570
Services	60,606	10,017	70,623	78,470	18,771	77,028	1,449
Wholesale and retail	138,981	11,524	150,505	161,843	54,481	150,525	2,529
Transportation and communications	31,568	4,004	35,572	36,858	10,173	47,224	729
Banks and other financial institutions	5,373	62	5,435	5,448	2,263	7,487	98
Other industries	478	102	580	766	55	682	11
Individuals	68,337	75,067	143,404	158,344	6,202	173,726	2,553

Total domestic	853,062	133,884	986,946	1,049,362	280,288	865,804	18,315

Foreign:
Total foreign	171,852	16,279	188,131	204,575	71,943	233,123	3,197

Total	1,024,914	150,163	1,175,077	1,253,937	352,231	1,098,927	21,512

F-20

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)


	Recorded investment⁽¹⁾
	Requiring an allowance for loan losses	Not requiring an allowance for loan losses⁽²⁾	Total	Unpaid principal balance	Related allowance⁽³⁾	Average recorded investment	Interest income recognized⁽⁴⁾
	(in millions of yen)
September 30, 2015
Domestic:
Manufacturing	371,546	6,904	378,450	384,245	135,628	428,984	4,120
Construction and real estate	69,628	19,404	89,032	99,881	13,427	95,171	719
Services	61,937	10,005	71,942	78,760	18,725	71,282	678
Wholesale and retail	137,968	12,407	150,375	165,087	50,905	150,440	1,162
Transportation and communications	29,811	4,817	34,628	36,045	7,756	35,100	352
Banks and other financial institutions	6,635	54	6,689	6,689	2,589	6,062	50
Other industries	3,394	75	3,469	3,655	965	2,024	23
Individuals	67,268	65,767	133,035	141,526	6,398	138,220	1,077

Total domestic	748,187	119,433	867,620	915,888	236,393	927,283	8,181

Foreign:
Total foreign	182,574	21,552	204,126	206,485	71,761	196,128	1,549

Total	930,761	140,985	1,071,746	1,122,373	308,154	1,123,411	9,730

Notes:

(1)	Amounts represent the outstanding balances of nonaccrual loans. The MHFG Group’s policy for placing loans in nonaccrual status corresponds to the Group’s definition of impaired loans.

(2)	These impaired loans do not require an allowance for loan losses because the MHFG Group has sufficient collateral to cover probable loan losses.

(3)

The allowance for loan losses on impaired loans includes the allowance for groups of small balance, homogeneous loans totaling ¥387,879 million and ¥378,469 million as of March 31, 2015 and September 30, 2015 which were collectively evaluated for impairment, in addition to the allowance for those that were individually evaluated for impairment.

(4)	Amounts represent gross interest income on impaired loans which were included in Interest income on loans in the consolidated statements of income.

The remaining balance of impaired loans which had been partially charged off was ¥25,980 million and ¥23,428 million as of March 31, 2015 and September 30, 2015, respectively.

F-21

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Troubled debt restructurings

The MHFG Group considers a TDR to be a restructuring in which it, for economic or legal reasons related to the obligor’s financial difficulties, grants a concession to the obligor that it would not otherwise consider. The Group considers the relevant obligor to be in financial difficulty when its obligor rating is E2 or below. The following table presents TDRs that were entered into during the six months ended September 30, 2014 and 2015:


	Loan forgiveness or debt to equity swaps				Interest rate reduction and/or Postponement of principal and/or interest
	Recorded investment^(Note)		Charge-offs
	(in millions of yen)
September 30, 2014
Domestic:
Manufacturing		—		1,236		55,570
Construction and real estate		—		—		19,554
Services		—		—		34,324
Wholesale and retail		—		—		79,515
Transportation and communications		—		—		14,359
Banks and other financial institutions		—		—		9,632
Other industries		—		—		1,867
Individuals		—		—		18,588

Total domestic		—		1,236		233,409

Foreign:
Total foreign		—		—		28,079

Total		—		1,236		261,488


September 30, 2015
Domestic:
Manufacturing		67,058		34,081		60,865
Construction and real estate		—		—		15,059
Services		—		—		23,345
Wholesale and retail		—		—		77,097
Transportation and communications		49		279		12,230
Banks and other financial institutions		—		—		4,776
Other industries		—		—		2,933
Individuals		—		—		17,066

Total domestic		67,107		34,360		213,371

Foreign:
Total foreign		—		—		23,971

Total		67,107		34,360		237,342

Note: Amounts represent the book values of loans immediately after the restructurings.

F-22

MIZUHO FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)—(Continued)

Payment default is deemed to occur when the loan becomes three months past due or the obligor is downgraded to the category of substantially bankrupt or bankrupt. The following table presents payment defaults which occurred during the six months ended September 30, 2014 and 2015 with respect to the loans modified as TDRs within the previous twelve months:


	Recorded investment
	September 30, 2014	September 30, 2015
	(in millions of yen)
Domestic: