Resona Earnings: No Big Surprises; We Like the Streamlining of Kansai Mirai Financial

We maintain our fair-value estimate of JPY 890 for Resona Holdings, 13% above the current price and 0.81 times book value as of September 2023 (0.87 times including unrealized losses on held-to-maturity securities). In contrast to the Japanese megabanks, which have big overseas operations and more diversified revenue from nonbank businesses, Resona’s reliance on domestic net interest income means its earnings outlook and share price depend to an even larger degree on the future path of yen interest rates. While we think Japanese bank share prices overall are in line with where we calculate intrinsic value given our outlook for only a gradual normalization in the Bank of Japan’s monetary policy, for Resona there is slight upside following the sectorwide correction since September.