(Changes to quarterly figures, adds details)
* Q3 net profit at Y207.5 bln vs Y16.3 bln a year earlier
* Japanese stock market rally pushes up value of portfolio
* Overseas loans continue to grow, domestic lending sluggish
By Taiga Uranaka
TOKYO, Jan 31 (Reuters) - Mizuho Financial Group Inc's third-quarter net profit soared more than 10 times after a year-end rally in the Japanese stock market pushed up the value of its massive equity portfolio.
Japan's financial institutions have benefited from a nearly 20 percent gain in the benchmark Nikkei average through the final three months of 2012, powered by investor expectations for Prime Minister Shinzo Abe's policies of massive fiscal spending, aggressive monetary easing and a weaker yen.
Earlier in the current financial year, Mizuho, Japan's second-largest lender by assets, suffered hefty impairment losses from its holdings of stocks, mostly those of corporate clients for business relationship.
Net profit climbed to 207.5 billion yen ($2.3 billion)for the quarter ended in December from 16.3 billion yen a year earlier, according to Reuters calculations based on Mizuho's nine-month results published earlier on Thursday.
Mizuho kept its full-year forecast at 500 billion yen, above an average estimate of 485.8 billion yen in a poll of 18 analysts by Thomson Reuters.
Domestic loan demand continues to be soft as corporate clients remain skittish about spending because of the country's weak economic growth.
One bright spot for Japan's biggest banks is sharp growth in overseas lending, with Japanese lenders leveraging their ample cash holdings as their European rivals retreat in the wake of that region's debt crisis.
Japanese bank profits were also boosted by yen's recent fall against dollar. The yen lost more than 10 percent in value against dollar in the final three months of 2012.
"Japanese banks have bigger dollar-based assets than before. Simple translation (of dollar-based earnings to yen) pushes up profits," said Yoshinobu Yamada, a banking analyst at Deutsche Securities. He said Mitsubishi UFJ Financial Group (MUFG) is likely to benefit most from a favorable currency trend, given the bank's large dollar-based exposure.
Sumitomo Mitsui Financial Group Inc (SMFG) kept its full-year profit forecast unchanged on Wednesday even after Japan's No.3 lender by assets posted nine-month earnings that had already beaten the estimate, underscoring the bank's cautious economic outlook.
Japanese banks are typically conservative in their forecasts, often holding off on upward revisions until near the end of the fiscal year.
"One of the reasons is their large exposure to equity. Stock market swings have significant impact on their earnings," said Chikako Horiuchi, an analyst at Fitch Ratings in Hong Kong.
Industry leader MUFG is scheduled to announce its results on Friday.
Shares of Mizuho rose 23.6 percent in the final three months of 2012, outperforming a 17 percent rise in the benchmark Nikkei average. The bank's shares rose 2.8 percent before the earnings announcement outperforming a 0.2 percent gain in the Nikkei.
$1 = 91.0650 Japanese yen Editing by Matt Driskill