* Banks beat market profit forecasts on stock-driven rally
* MUFG tips profit down 4 pct this FY; Mizuho, SMFG down about 20 pct
* MUFG buoyed by overseas reach as domestic lending still subdued
By Taiga Uranaka
TOKYO, May 14 (Reuters) - Japan's three biggest banks beat market forecasts with record annual profits, fuelled by a stock market boom, but said earnings will fall this business year as the glow of "Abenomics" fades and lending gains remain restrained.
Mitsubishi UFJ Financial Group Inc (MUFG) on Wednesday forecast a modest pullback in profit for the business year that began in April.
Japan's biggest lender by assets will be buoyed by a greater overseas reach than the other two "megabanks," analysts said, underscoring the difficulty facing banks 17 months after Prime Minister Shinzo Abe took office on a pledge to end 15 years of deflation with loose-money stimulus policies.
Mizuho Financial Group Inc and No. 3 lender Sumitomo Mitsui Financial Group Inc (SMFG) both forecast double-digit relapses in profit this business year.
"The Abenomics effect - rises in stock prices driven by low interest rates - comes first," Mizuho President Yasuhiro Sato told reporters. "The link to increased funding demand comes from here on."
MUFG said net profit rose 15.5 percent last business year to 984.8 billion yen ($9.63 billion), above the 944.1 billion yen mean estimate of 19 analysts polled by Thomson Reuters.
But for this year, MUFG - which owns about one-fifth of Morgan Stanley - expects profit to slip 3.5 percent to 950 billion yen, still above the analyst forecast of 907.6 billion yen.
Mizuho's net climbed 23 percent to 688.42 billion yen, beating the analyst estimate of 664 billion yen. The bank expects profit to fall 20 percent this business year to 550 billion yen, near the market estimate of 558.2 billion yen.
SMFG booked a 5.2 percent profit rise to 835.36 billion yen, above the 799.8 billion yen consensus, but expects a pullback of 19 percent to 680 billion yen, near the market view of 689.7 billion yen.
Japan's Nikkei 225 Stock Average rose 20 percent last fiscal year but is off 3 percent so far this business year as investors grow impatient that Abe will introduce the hard structural reforms to the word's third-biggest economy that are considered essential for sustainable growth.
MUFG, which aspires to be a top 10 U.S. bank by 2016, paid about $5 billion in December for 72 percent of Thailand's Bank of Ayudhya PCL, adding 2 trillion yen to MUFG's overseas loan book.
The purchase will start boosting MUFG's profit in earnest this year, said analyst Nana Otsuki at Merrill Lynch Japan Securities before the results. Considering the profit relative to the amount of capital, however, MUFG's advantage is not particularly strong, Otsuki said.
$1 = 102.2250 Japanese Yen Writing by William Mallard; Editing by Christopher Cushing