* Net profit Y576.5 bln vs Y603.5 bln year prior

* Profit falls even with gains from release of bad loan reserves

* Expects profit to fall 1.1 pct in current year (Adds further earnings details, context)

TOKYO, May 15 (Reuters) – Mizuho Financial Group Inc on Tuesday reported a 4.4 percent fall in net profit for the year ended March, albeit beating analyst estimates, weighed down by a weak lending business plagued with ultra-low interest rates.

Japan’s third-largest lender by market valuation said profit totalled 576.5 billion yen ($5.24 billion), versus 603.5 billion yen a year earlier. It was the smallest profit in five years.

The result compared with the 559.6 billion yen average of 12 analyst estimates compiled by Thomson Reuters.

Japanese banks have been suffering diminishing returns from loans to both retail and corporate customers due in part to the Bank of Japan’s five-year-old economic stimulus programme, under which the central bank charges private lenders to deposit money with it. That effectively forces banks to increase lending, raising competition and pushing down loan interest rates.

Mizuho suffered a decline in profit even after booking hefty gains from equity holdings and reallocating funds previously set aside to cover bad loans.

Sumitomo Mitsui Financial Group Inc, Japan’s second-biggest lender, on Monday reported a 3.9 percent rise in net profit for the year ended March, reaching its highest in three years, helped by lower bad loan costs and gains from equity holdings.

For the year ending March 2019, Mizuho forecast profit of 570 billion yen, down 1.1 percent from the just-ended year. That compared with a 524 billion yen average of 14 analyst estimates. ($1 = 109.9400 yen)