TimesSquare Capital Management, LLC on Fukuoka Financial Group, Inc.
Thesis
TimesSquare added to Fukuoka Financial throughout the quarter as Japan moved into a higher interest-rate environment. Earnings exceeded expectations and profits rose 27% year over year. Management estimated that each 25-basis-point increase in Japanese rates generates an additional ¥10-15 billion of net profit. Fukuoka also has exposure to growth in Kyushu, described as Japan’s silicon island, giving the regional bank an economic-growth driver alongside expanding interest income.
“they estimated that each 25-bp rate increase adds ¥10-15 billion of net profit.”
Key risks
- The outlook depends in part on continued Bank of Japan rate increases.
- Persistent yen weakness and restrictive monetary conditions may affect the Japanese economy.