Japan’s top 3 banks to report losses for first time
04 Apr 2009
Japan's three biggest banking groups are expected to report net losses for the fiscal year ended 31 March amid the global financial crisis, local media reported on Saturday.
It would be the first net loss by the three - Mitsubishi UFJ Financial Group Inc, Mizuho Financial Group Inc and Sumitomo Mitsui Financial Group Inc - in six years, the Asahi Shimbun and the Nikkei business daily reported. The three, which previously projected net profits for the fiscal year, are expected to downgrade their forecasts by the end of April.
The expected losses are mainly due to larger than anticipated bad debts and a sharp decline in their share values as the nation's financial markets struggle to recover from the crisis. Mizuho and Sumitomo in particular will write off losses in Merrill Lynch and Co and Barclays Plc for the fiscal year.
"We've decided to write down the valuation losses and lower the book prices," an SMFG official said. "We hope that the stocks will rebound in the future."
The banks had provided equity to major US and European financial institutions that were suffering from capital shortfalls due to the global financial crisis. Mizuho provided about 130 billion yen (876 million pounds) to Merrill in January 2008 in exchange for 9 per cent preferred shares, an investment on which it is expected to take a loss of about 80 billion yen, Nikkei reported. Merrill was eventually acquired by Bank of America.
Sumitomo Mitsui bought about 100 billion yen of Barclays common shares in July and plans to write down the investment by about 60 billion yen, the paper said. The third bank, Mitsubishi UFJ Financial Group, bought preferred shares from Morgan Stanley for about 900 billion yen, but does not plan a write-down now.
Mitsubishi UFJ and Mizuho had reported losses for the first three quarters of the fiscal year and "are now sure to fall into the red" for the full year, Nikkei said. Sumitomo Mitsui was profitable for the first nine months, but will likely report a loss for the year because of the expected Barclays writedown and an increase in loan loss reserves.