Japan's Top Banks Post Annual Losses

 

Top Japanese banks tumbled to steep annual losses, hit by bad loans and plunging share prices, but said Friday that they expect to turn a profit this fiscal year.

Mizuho Financial Group Inc., Japan’s second-largest bank, posted a group net loss of 588.8 billion yen ($6.2 billion) for the fiscal year ended March, swinging from a 311.2 billion yen ($3.25 billion) profit a year earlier. It was Mizuho’s first annual loss in six years.

Mizuho’s smaller rival Sumitomo Mitsui Financial Group Inc., or SMFG, reported a net loss of 373.5 billion yen ($3.9 billion), down from 461.5 billion yen profit in the previous year.

Japan’s major banks managed to weather the U.S. subprime mortgage crisis with far smaller losses than their Western counterparts, but they are now facing the painful impact of of the global recession.

Cross-shareholding arrangements with domestic companies, commonly used to foster business ties, are hurting the banks amid a drop in stock values. Bad loans are also mounting as more companies face bankruptcy.

Japan’s three “megabanks” — Mizuho, SMFG and Mitsubishi UFJ Financial Group Inc. — had all projected annual losses, after drastic downgrades of initial profit estimates. Mitsubishi UFJ, now expecting a 42 billion yen ($439 million) loss, is releasing its earnings Tuesday.

“Corporate earnings were significantly aggravated, affected by drastic declines in exports due to the deteriorating world economy and appreciation of the yen,” Mizuho said. “As a result, the number of bankruptcies increased … and stock prices fell sharply.”

Annual revenue at Mizuho fell 22.3 percent to 3.51 trillion yen ($36.7 billion) compared with 4.52 trillion yen in fiscal 2007. Revenue at SMFG fell 23.2 percent to 3.55 trillion yen ($37.1 billion).

For the fiscal year through March 2010, Mizuho expects a net profit of 200 billion yen ($2.1 billion), on revenue projected at 3.20 trillion yen ($33.4 billion). SMFG is projecting a net profit of 220 billion ($2.3 billion) on revenue of 3.4 trillion yen ($35.5 billion).

But rating company Fitch Ratings lowered credit ratings of SMFG and some of its subsidiary banks, citing “poorer-than-expected performance” and “weaker capital quality.”

“The downgrades reflect the impact of a rapidly worsening operating environment,” Fitch said in a statement.

Mizuho announced plans to raise capital of up to 600 billion yen ($6.27 billion) through a public stock offering beginning Saturday for one year. SMFG also announced plans to raise up to 800 billion yen ($8.4 billion) of common equity.

Their plans to bolster capital restored market confidence, helping the benchmark Nikkei 225 stock index to rise 1.9 percent.

Mizuho shares closed up 2.2 percent to 237 yen, and SMFG shares jumped 6.8 percent to 3,920 yen on the Tokyo Stock Exchange. Both results were announced after the close of trading.

The earnings results were based on Japanese accounting standards.

5/15/2009 8:26 AM MARI YAMAGUCHI Associated Press Writer TOKYO