Technology distracts users from family life. At Mizuho Financial, it distracts investors from structural problems instead. 

This week, Japan’s second-largest bank cut its full-year profit outlook by 86 per cent from a year earlier. Net income in the year to March 2019 will be ¥80bn ($717m), not ¥570bn as forecast. The reason is a ¥680bn loss. Three-quarters of this is an impairment charges on fixed assets, including software, from branch closures. The rest comes from foreign-bond holdings losses.

If it were as simple as closing branches for the first time, or even some bad investment decisions, the impact might be less surprising. But Mizuho started shutting branches in 2017, cutting almost 20,000 jobs. A shift to digital banking has long been planned. Peers Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group completed writedowns on branch shutdowns in the year ending March 2017. 

Much of the loss comes from reassessing the value of software systems used in its domestic retail banking business. Mizuho has been vague about the exact reason for the revaluation. The bank has had more than its fair share of technical problems including an ATM system crash eight years ago and an online brokerage platform failure last year.

Mizuho has bigger issues in its main banking business, where it suffers from its skinny net interest margin. As for new businesses, Mizuho’s digital currency platform faces competition from fintech newbies such as Japan’s messaging app Line, which already has a massive user base. Even if its new ventures take off, offsetting the weakness in core banking will take years. 

Given the halting progress on its new businesses as banking struggles with low interest rates, there are better choices for those keen on Japanese banks.

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