Comparison strategy note of 3 major megabanks | Where will MUFG, SMBC, and Mizuho differ in 2027?

[Summary]

Mitsubishi UFJ Financial Group (8306), Sumitomo Mitsui Financial Group (8316), and Mizuho Financial Group (8411) all posted record-high profits in their May 2026 financial results, as well as increased dividends and stock buybacks. Japanese bank stocks have clearly entered a phase different from the ``era of no interest rates.''

However, if we lump all three companies together under the same "good financial results for megabanks," the results will be quite sloppy. The focus is on MUFG's scale and global diversification, SMBC's high ROE and the Olive/Card/Jefferies story, and Mizuho's credit recovery after passing PBR 1x and One Mizuho's profitability.

What I would like to note is that as of May 2026, the market price is no longer ``only Mizuho is overwhelmingly cheap at 0.8x PBR''. All three companies have made considerable progress in correcting their PBR below 1x. What the market will be looking at heading into 2027 is not whether these stocks are cheap bank stocks, but whether they can maintain the quality of their profits as high ROE financial stocks.

First, the conclusion

Comparing the three mega-companies for 2027, rather than simply ranking them, the perspective will change depending on what investors are looking for.

MUFG is the easiest to hold for large funds. Domestic interest rates, Morgan Stanley, Asian Commercial Bank, and shareholder returns are all in place, so there is a sense of security as a core stock of a megabank. However, when the stock price reaches the 3,000 yen level and the PBR reaches around 1.6 times, it becomes a stock that confirms the stability of profits and additional returns rather than explosive power.

SMBC Group has the strongest story among the three companies. Olive, Sumitomo Mitsui Card, SBI Securities collaboration, Jefferies collaboration, AI/IT investment. Although it is a bank stock, it has a bit of a growth stock valuation. Expectations are high. Therefore, even if the financial results are good, if the results are within expectations, it is easy to sell at a profit.

Mizuho FG has begun to change from its previous reputation as a ``late-starting, low-PBR bank''. As of May 22, 2026, the stock price is 7,457 yen, and the PBR is approximately 1.6 times. From here on, instead of recovering PBR to 1x, we will be looking at whether we can maintain ROE of 11.4% and move towards over 12%. The market has started to trust a lot, but not completely yet. This skepticism creates both room for upside and risks.

Comparison summary

Based on the stock price level as of May 22, 2026 and each company's plans, the comparison of the three companies looks like this.

The important thing here is that the difference in PBR is no longer as simple as it used to be. In the past, it could be said that only Mizuho was undervalued with a PBR of less than 1x, but now all three companies have a PBR of 1x. Rather than buying bank stocks because they are cheap, the market is starting to select stocks based on the balance of ROE, returns, interest rate sensitivity, and credit costs.

The PBR correction market has progressed considerably. You can see the quality from here.

The benefits of rising interest rates are common, but the effects are different

On May 18, 2026, the yield on Japan's newly issued 10-year government bonds temporarily rose to 2.8%. This is a strong and easy-to-understand factor for bank stocks. Deposit and loan interest rate differential, loan yield, and securities investment yield. When long-term interest rates rise, banks' expectations for capital gains inevitably rise.

However, not all three companies receive the same interest rate benefits.

In addition to the rise in domestic yen interest rates, MUFG will benefit from Morgan Stanley-related transactions, Asian partner banks, and overseas corporate transactions. Since it is not based solely on interest rates, there is a sense of diversification. Conversely, it is also susceptible to the effects of overseas economies and market environments.

SMBC Group has shown that a 0.25% increase in policy interest rates will have an impact on earnings of approximately 110 billion yen in the first year, making it easy to explain interest rate sensitivity to the market. There are also collaborations with domestic corporations, payments, cards, and securities, aiming for high ROE in both interest and non-interest rates.

Mizuho FG is effective for domestic corporate, local government, and large corporate transactions, government bond management, and One Mizuho's solution sales. While the benefits of rising interest rates are easy to see, so are bond portfolios and credit costs. The fact that the company carried out approximately 150 billion yen in strengthening its securities portfolio in the fiscal year ending March 2026 is a factor that is easy for the market to evaluate.

The scary thing about bank stocks is that a rise in interest rates will no longer be considered a ``good interest rate rise.'' Corporate repayment burdens, bond valuation losses, foreign currency procurement costs, overseas credits, and commercial real estate. When market attention shifts there, its momentum as an interest rate-sensitive sector suddenly slows down.

MUFG is the “champion”, but the top price depends on surprises

MUFG's strengths are its scale and diversification.

Domestic commercial banks, trusts, securities, asset management, Morgan Stanley, Asian partner banks. Among the three megabanks, it has the strongest characteristics of a global/universal bank. While incorporating the normalization of Japanese interest rates, we can also pick up on overseas capital markets and growth in Asia.

Net profit for shareholders of the parent company for the fiscal year ending March 2026 is 2,427.2 billion yen. The target for the fiscal year ending March 2027 is 2.7 trillion yen. The annual dividend forecast is 96 yen. The company has already acquired 500 billion yen of its own shares in fiscal 2025, and has resolved to acquire up to 100 billion yen in the first half of 2026.

Looking at these numbers, there is an outstanding sense of stability.

However, when the stock price reaches 3,091 yen and the PBR reaches around 1.6 times, it is no longer ``cheap because it is a bank stock''. What MUFG needs to do is to prevent ROE of around 12% from being temporary, and to show that there is room for additional returns from the second half onwards. The market considers MUFG to be an easy buy as it is a major megabank, but at the same time it also sees it as ``highly priced in.''

It's strong, but it's a little less surprising. That's typical of MUFG.

SMBC has the most story, but expectations are also high.

SMBC Group has the easiest growth story to explain among the three companies.

Collaboration with Olive, Sumitomo Mitsui Card, V Points, and SBI Securities. This is where Jefferies collaboration and AI/IT investment will be added. Bank stocks include payments, securities, asset management, investment banking, and generative AI themes. Therefore, in the market, it is seen as more than just an interest rate-sensitive stock, but as a high ROE financial platform.

Net profit for shareholders of the parent company for the fiscal year ending March 2026 is 1,583 billion yen. The target for the fiscal year ending March 2027 is 1.7 trillion yen. The forecast dividend is 180 yen, and the initial share buyback will be 180 billion yen. A 1:2 stock split is also planned for October 2026.

There are many materials. In fact, it's almost too much.

However, there is also a risk of expectations going too far. PBR is 1.45x and dividend yield is 3.0%. The numbers alone are not enough to say it's overheated yet, but the market is buying a little ahead of Olive's profitability, the cost-effectiveness of AI investment, and the possibility of collaboration with Jefferies.

What I want to see most about SMBC is ARPU, not the number of members. Is Olive really expanding into cards, investment trusts, foreign currencies, loans, and securities collaboration? Does AI investment really improve expense ratios and gross profit per employee? If you can see that, you can get the highest evaluation among bank stocks.

If it is not visible, stock prices will be weighed down even with good financial results.

Mizuho is no longer "super cheap." Still interesting

Regarding Mizuho FG, it would be better to say it a little differently.

It's no longer the case that it's cheap because it's left at a PBR of 0.8x, as it was before. Assuming the stock price of 7,457 yen on May 22, 2026, the PBR is approximately 1.6 times. The dividend yield has also fallen to around 2.0%. At the very least, it is no longer simply a high dividend/low PBR stock.

Still, what makes Mizuho interesting is that it appears that the market's confidence is still in the process of recovering.

Net profit for shareholders of the parent company for the fiscal year ending March 2026 is 1,248.6 billion yen. TSE standard ROE is 11.4%. The company is forecasting 1.3 trillion yen for the fiscal year ending March 2027, and has set an ROE of over 12% for fiscal 2028. Considering past system failures and low profits, this change is quite significant.

The number of materials is increasing, such as One Mizuho's integrated banking, trust, and securities operations, transactions with large domestic companies and local governments, CIB in the Americas, Greenhill, Rakuten collaboration, and AI-IVR. In Mizuho's case, rather than having a flashy theme, I get the impression that the company has finally entered a stage where its earning power and capital efficiency are recognized by the market.

However, the market is not easy here either. Bond valuation losses, overseas credit, credit costs, ability to implement systems and digital investments. If even the slightest doubt returns, it will be easy to sell because it feels like the PBR correction has come to an end. Rather than being a dark horse, I think Mizuho is a stock that will be tested for the sustainability of its credit recovery.

It is easier to understand the growth strategies of the three companies by dividing them.

The differences between the three companies become quite clear when you compare their growth strategies.

MUFG is a bank that wins with scale.

SMBC is a bank that wins with efficiency and implementation.

Mizuho is a bank that is trying to get reevaluated by restoring credit and integrating management.

This kind of view makes sense for 2027. It's not a matter of deciding which one will go up, but rather a matter of which risks to take.

How do you see the upside room in 2027?

We do not decide on individual achievement levels here. In the current market for megabanks, it is more practical to look at what creates the top price and what suppresses the top price, rather than placing a price on a single stock.

MUFG is based on the 3,000 yen level, and if we can see additional returns and a sustained ROE of around 12%, it will be solid. When overseas investors buy interest rate normalization in Japan, they are likely to be among the first candidates. However, it has already been highly rated and needs one more ingredient to make a big splash due to its unexpectedness.

SMBC has room for upside, but expectations are also high. If Olive, Jefferies, and AI investments become visible as net business profits, they will be relatively preferred among bank stocks. On the other hand, if digital appears to be the hot topic, momentum tends to slow down.

Mizuho is a stock that we still have high expectations for just looking at its rate of increase, but the reason is not because it has a low PBR. If One Mizuho maintains an ROE of 11.4%, keeps credit costs down, reduces concerns about its bond portfolio, and continues to generate profits, the market's confidence will rise even further. It will be interesting if you can get that.

In other words, here's how we can win in 2027.

Common risks

The biggest risk common to all three companies is the expiry date of trades that increase interest rates.

If long-term interest rates remain high and expectations for further interest rate hikes by the Bank of Japan continue, it will be easy for banks to invest in bank stocks. Foreign funds, TOPIX value funds, and funds aimed at dividends and share buybacks are also easy to move.

But bank stocks are already heavily bought. The correction of PBR below 1x is starting to appear to be coming to an end, and there will likely be more instances where stock prices are sluggish even with good financial results. When the market starts to consider credit cost concerns rather than interest rate benefits, all three companies sell in the same direction.

The risks to look at are quite specific.

When it comes to bank stocks, when there are many positive factors, it is better to look at risks side by side. If you skip this point, you'll end up with the textbook ``bank stocks are strong because of rising interest rates.''

Summary

All three major megabanks posted strong numbers in their May 2026 financial results. Record-high profits, increased dividends, share buybacks, and rising domestic interest rates. If you just lay out the ingredients, you'd be tempted to call it a golden age for bank stocks.

However, stock prices are moving ahead of the curve.

MUFG is the easiest to hold due to its size and global diversification. SMBC has the strongest growth story with Olive and Jefferies and AI/IT investment. After passing the PBR of 1x, Mizuho has entered the stage of proving to the market its ROE and credit recovery.

Looking ahead to 2027, the market will look at "which one can justify the current PBR" rather than "which one is the cheapest." Interest rate benefits are common to all three companies. The difference will be in the sustainability of ROE, credit costs, bond portfolio, additional returns, and whether the digital and overseas businesses truly generate net business profits.

Personally, I think the most natural arrangement would be MUFG to play defense, SMBC to attack based on story, and Mizuho to bet on the continued recovery of trust. However, it's no longer a situation where you just ``buy it because it's cheap''. From now on, the market for megabanks has become more about how much the market still doesn't trust good financial results, rather than good financial results.

Source

• Mitsubishi UFJ Financial Group “FY2025 Financial Results”
• Mitsubishi UFJ Financial Group “FY2025 Financial Results Investor Presentation Materials”
• Sumitomo Mitsui Financial Group “Summary of Financial Results for the Fiscal Year Ending March 2026”
• Sumitomo Mitsui Financial Group “FY2025 Financial Results Investor Briefing Material”
• Mizuho Financial Group “Summary of FY2025 Financial Results”
• Mizuho Financial Group “IR Company Briefing Materials”
• Traders Web "Sumitomo Mitsui Financial Group Stock Price and Stock Data"
• Nomura Securities “Mizuho Financial Group Stock Price”
• nippon.com / Jiji Press “Long-term interest rates temporarily rise to 2.8%”
• Confirmation date: 2026-05-23