2 Japanese megabanks sink into red in FY 2008+

2 Japanese megabanks sink into red in FY 2008+

TOKYO, May 15 Kyodo -
Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. said
Friday they sank into the red in fiscal 2008 ended March due to mounting
bad-loan disposal costs and equity investment losses amid the global financial
crisis.

Mizuho, Japan's second-largest banking group, said it logged a net loss of
588.81 billion yen, its first red ink in six years, against a net profit of
311.22 billion yen the year before.
No. 3 lender Sumitomo Mitsui Financial Group Inc. reported its first red ink in
four years for the reporting year, with a net loss of 373.46 billion yen,
against a net profit of 461.54 billion yen in fiscal 2007. The group was hit by
losses due to a fall in the value of its stake in Barclays Plc.
Industry leader Mitsubishi UFJ Financial Group Inc. is scheduled to release its
earnings results on Tuesday but as it has already forecast a net loss of 260
billion yen, all of Japan's three megabanking groups are expected to have sunk
into the red in fiscal 2008.
On Friday, three smaller peers -- Sumitomo Trust & Banking Co., Chuo Mitsui
Trust Holdings Inc. and Resona Holdings Inc. -- also reported losses or sharp
declines in profits in their net balances for the year, citing reasons related
to the global financial turmoil since last summer stemming from U.S. subprime
mortgage crisis.
Japanese banks were at first relatively unscathed by the U.S. mortgage crisis
and made high-profile investments in troubled Western peers, such as Mitsubishi
UFJ Financial's purchase of a stake of around 20 percent in Morgan Stanley for
around 900 billion yen.
But Japanese banks have faltered due to write-downs in the value of their vast
shareholdings in tandem with the global stock market turbulence.
Japanese banks have traditionally held stakes in clients to cement ties, a
practice seen as making them vulnerable to stock market fluctuations.
''I feel anew that Japanese financial institutions are very vulnerable to an
economic downturn,'' Mizuho President Takashi Tsukamoto said at a press
conference, noting that the banks' cross-shareholdings, together with swelling
credit costs, deal a heavy blow to their earnings during a recession.
Mizuho said it incurred losses of 400 billion yen related to equity investments
while Sumitomo Mitsui incurred 183 billion yen of similar losses.
Mizuho's capital adequacy ratio stood at 10.55 percent at the end of March,
while Sumitomo Mitsui's was at 11.47 percent, securing the 8 percent threshold
required for banks operating internationally.
Japanese banks' earnings were also hit by growing bad-loan disposal costs as
bankruptcies spread from the real estate and construction sectors to almost all
industries.
''The volume of bankruptcies in the next half a year will be key'' to the
financial health of banks, Resona Holdings President Eiji Hosoya told
reporters.
For the current business year that started April 1, all of the five banks said
they expect to post profits amid emerging positive signs for the Japanese
economy, while implementing measures to strengthen their financial standing and
restructuring steps.
Mizuho is projecting a net profit of 200 billion yen for fiscal 2009. To help
strengthen its thinning capital base, Mizuho said it will raise about 800
billion yen in capital by issuing 600 billion yen worth of common stocks and
200 billion yen of preferred securities.
''We plan to use this money to support our business growth in Asia,'' Mizuho's
Tsukamoto said, citing buoyant demand for capital in China and India.
Sumitomo Mitsui Financial is projecting a return to the black in fiscal 2009
with a profit of 220 billion yen.
Chuo Mitsui Trust incurred an annual net loss of 92.03 billion yen in the
just-ended business year, but said it will post a profit of 30 billion yen this
fiscal year.
Sumitomo Trust and Resona managed to stay in the black in fiscal 2008.
Sumitomo Trust posted a net profit of 7.95 billion yen, but it was down 90.3
percent from a year earlier.
Resona booked a net profit of 123.91 billion yen in fiscal 2008, aided by 62
billion yen from selling its headquarters building in Tokyo, but its net profit
was down 59.1 percent from a year earlier.
For fiscal 2009, Sumitomo Trust is projecting a net profit of 45 billion yen,
while Resona is anticipating a net profit of 100 billion yen.
==Kyodo