UPDATE: Japan Bks Hit By Bad Loans; Mizuho Falls Into Loss
30 January 2009 - 8:46PM
Dow Jones News
Japanese banks confirmed Friday that their profits have been
severely damaged by the economic downturn with Mizuho Financial
Group Inc. (8411.TO), the nation's second largest banking group by
assets, saying it fell deep into the red in the April-December
period.
Citing inflated credit costs and a massive Y243.8 billion
valuation loss from its equity holdings, Mizuho said it posted a
group net loss of Y50.55 billion in the nine months ended Dec. 31,
down from a net profit of Y393.03 billion in the same period a year
earlier.
Group revenue also decreased to Y2.777 trillion from Y3.428
trillion during the period.
The Tokyo lender said it booked the valuation losses in the
October-December quarter.
The result is a sign of how Japanese banks, which have been seen
as relatively unscathed by the global financial turmoil, have been
hurt by the deteriorating economy.
Japanese banks don't disclose third-quarter figures. But
according to a calculation by Dow Jones Newswires based on Mizuho's
three-month financial report, its losses came to Y145.12 billion in
the third quarter from a profit of Y65.97 billion in the same
period a year earlier.
The banking group lowered its profit estimates for the full year
through March 31. It now expects a group net profit of Y100
billion, down from its previous forecast of Y250 billion. But it
kept its operating revenue target of Y3.8 trillion.
"We had expected the poor results (from banks) but now we
realize (how bad they really are)," said Shinichi Tamura, an
analyst at Deutsche Securities, adding the coming fourth quarter
will continue to be tough.
For Mizuho, Tamura noted the market environment will likely
continue to derail its profits in the fourth quarter as the Nikkei
225 Stock Average index stays below its range in the third
quarter.
The financial group's paper profits on investments turn to
mark-to-market losses below that point. But the Nikkei 225 closed
Friday down 3.1% at 7994.05. It has fallen 29% since the end of
last September and 37% since the start of the fiscal year last
April.
More corporate bankruptcy filings toward the end of the fiscal
year could force Mizuho to book higher credit costs, the Deutsche
analyst said.
Tamura, who has a rating of Buy for Mizuho, said until investors
are assured that Mizuho will likely return to the black in the next
fiscal year, uncertainty about the bank will remain.
Earlier this week, Mizuho's smaller rival, Sumitomo Mitsui
Financial Group Inc. (8316.TO) released dismal results, but managed
to post a profit thanks to higher interest income and
smaller-than-expected credit costs.
Japan's largest bank, Mitsubishi UFJ Financial Group Inc.
(8306.TO) will likely slip into the red for the quarter to Dec. 31
as it has already said it expects securities valuation losses
totaling Y257 billion for the three month period. MUFG will report
its results on Feb. 6.
Meanwhile, Resona Holding Inc. (8308.TO), Japan's fourth-largest
bank, reported a 41% drop in net profit in the April-December
period, posting Y114.66 billion from Y195.39 billion in the same
period a year ago.
Japan's major trust banks, Sumitomo Trust & Banking Co.
(8403.TO) and Chuo Mitsui Trust Holdings Inc. (8309.TO) also
reported weak profits Friday. Sumitomo Trust posted a 62% decline
in net profit to Y20.40 billion from Y53.85 billion a year ago. Net
profits at Chuo Mitsui dropped 85% to Y9.17 billion from Y63.07
billion a year earlier. Both banks blamed impairment losses on
equities and a decline in their fee businesses.
All of the Japanese banks report their earnings results based on Japanese accounting standards.
-By Atsuko Fukase, Dow Jones Newswires; 813-5255-2957;
atsuko.fukase@dowjones.com
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