Mizuho Financial Group Inc., the country's second-largest banking group by assets, said Monday its group net profit for the first half of fiscal 2005 through September rose 44.7 percent from a year earlier, as the economic recovery boosted the financial health of its corporate borrowers.

This improvement led to a sharp cut in costs associated with the bank's bad-loan disposals, which have weighed on earnings for years.

Recent surges in the stock market also helped buoy Mizuho's capital gains.

The figures are the latest indication the banking sector is emerging from the harsh environment of loan disposals and shifting toward a focus on increasing income.

Mizuho's net profit for the latest six-month period came to 338.6 billion yen, the highest half-year profit the company has seen since 2002, when a merger of three banks created the Mizuho group. The profit compares with a 233.9 billion yen net profit for the same period a year earlier.

The bank forecasts a 630 billion yen net profit for the full year to next March.

"The peak of the bad-loan disposals is completely over, and the demand of loans is coming back a bit," Mizuho Financial Group president and CEO Terunobu Maeda said at a news conference.

But he added the core lending business remained sluggish with profits coming mostly from the nonlending portion of the business, such as commissions from syndicated loans and sales of investment products to retail customers.

Mizuho also underscored the improvement in its own financial strength. The bank's ratio of bad loans to total lending fell to 1.85 percent at the end of September, down from 2.16 percent at the end of March.

Mizuho had already reached the government target to halve the bad-loan ratio from the September 2002 figure.