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TOKYO, May 22 (Reuters) Mizuho Financial Group, Japan's second-biggest bank, posted a 3.6 percent gain in annual net profit on Monday, helped by lower costs of bad loans, and forecast a further rise in earnings this year.

Mizuho and other lenders have been on the mend since 2003 thanks to a stronger economy and efforts to clean up problem loans, and profits at the six biggest banks likely hit a record high in the year ended March 31.

Mizuho's group net profit of 649.9 billion yen ($5.80 billion) compared with 627.4 billion yen the previous year but fell short of the average projection of 672.7 billion yen by 13 analysts polled by Reuters Estimates.

The bank's own profit estimate was 630 billion yen. For the current year to next March it forecast net profit would rise 11 percent to 720 billion yen, well above the market consensus figure of 671.8 billion yen.

Mizuho's profit gain came despite the inflated standard it set a year earlier, when a 280 billion yen tax rebate boosted its bottom line, and its brokerage unit Mizuho Securities committed a 40.7 billion yen share-trading blunder in December.

Mizuho filled much of the gap left by the botched trade and last year's tax rebate -- booked after a successful lawsuit against the government -- with gains on its share portfolio, higher profits from trading and more fees and commissions.

Net profit at Japan's six major banking groups, all of which report this week, likely surpassed 3 trillion yen ($27 billion) in 2005/06, four times the previous year's total and beating the peaks set in the boom years of the 1980s.

Earlier, fifth-ranked lender Sumitomo Trust&Banking Co.

said its annual profit rose 3.3 percent to 100.07 billion yen ($891.6 million), and No.6 lender Mitsui Trust Holdings said its profit rose 27 percent to 119.7 billion yen.

Top lender Mitsubishi UFJ Financial Group (MUFG) reports later on Monday.

Shares in Mizuho jumped 90 percent in the year ended March 31, beating a 66 percent gain in the sector as a whole IBNKS, but outpaced by MUFG's 93.5 percent rise.

($1=112.15 Yen) REUTERS PV RK1320