Mizuho expects 1st red ink in 6 years for FY 2008+

TOKYO, April 23 Kyodo - Mizuho Financial Group Inc. said Thursday it expects to fall into the red in fiscal 2008 for the first time in six years, with a group net loss of 580 billion yen as the global economic slump has sharply eroded its earnings.

The loss, compared with an earlier projected 100 billion yen profit and a
year-earlier profit of 311.2 billion yen, largely stems from the stock market
turbulence which boosted its appraisal losses, and the deteriorating economy
which increased bad-loan disposal costs.
For the year that ended March 31, Mizuho, one of Japan's three megabanks, also
said it now projects a pretax loss of 400 billion yen, in a reversal from an
earlier expected 220 billion yen, on operating revenues of 3.8 trillion yen,
unchanged from its estimate in January. It posted a pretax profit of 397.12
billion yen on operating revenues of 4.52 trillion yen in fiscal 2007.
With Mizuho's anticipated loss, all of the nation's three megabanks, which also
include Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group
Inc., are now almost certain to report red ink for fiscal 2008, sources close
to the matter said.
In the financial sector, Japan's largest brokerage house Nomura Holdings Inc.
is also likely to incur a record group net loss of about 700 billion yen for
fiscal 2008. Norinchukin Bank, mainly serving agricultural cooperatives, is
expected to mark a record parent-only pretax loss of around 620 billion yen,
sources said.
The deterioration in earnings at many major Japanese financial institutions may
have an adverse effect on their lending stance, dealing a further blow to the
already weakening corporate sector, observers said.
Given rising bad loans, Mizuho Financial Group said it expects to spend 560
billion yen in costs for bad-loan disposals on a group basis, up 230 billion
yen from its previous plan.
Of its key group banks, Mizuho Bank, which targets individuals and small and
medium-sized companies, now expects 315 billion yen in costs related to the
write-offs, while Mizuho Corporate Bank, which serves large companies, eyes 200
billion yen in similar costs.
The financial group also raised its projected costs for losses linked to equity
investments by 300 billion yen to 410 billion yen due to falls in stock prices
at home and abroad.
The losses include about 80 billion yen in preferred shares in Merrill Lynch &
Co., which it bought last year for about 130 billion yen. The company intends
to accelerate efforts to restore its financial health under the new management
installed earlier this month at the holding company and two group banks.
As for its mainstay lending business, the outstanding balance of lending rose
in the latter half of fiscal 2008 as companies found it difficult to raise
capital by themselves through issuing corporate bonds and other financial
instruments due to the global financial crisis, and resorted to bank lending.
But Mizuho's revenue in lending was sluggish due to a fall in interest rates.
Given the deteriorating earnings, major financial institutions have implemented
a series of large-scale capital reinforcements to strengthen their narrowing
capital bases.
Among them was Sumitomo Mitsui, which announced on April 9 that it expects to
incur 390 billion yen in group net loss for fiscal 2008, and that it will issue
up to 800 billion yen in new common shares to enhance its capital base.
With calls increasing internationally for stricter regulations on financial
institutions' capital adequacy ratios, Mizuho is also expected to consider
issuing preferred securities or taking other measures to boost its capital,
sources said.
Mizuho estimates that it has maintained its capital adequacy ratio at over 10
percent as of the end of March. It said it would consider implementing capital
reinforcement if necessary, though details including the timing, size and form
are yet to be decided.
==Kyodo
2009-04-24 0