The Economic Times Saturday, April 06, 2002
Top Japan banks seen posting 01-02 net loss REUTERS TOKYO: All top Japanese banking groups are likely to bleed red ink for the 2001-02 business year that ended last week as they aggressively boosted loan-loss provisions against risky borrowers, analysts said today. Two of them - Mitsubishi Tokyo Financial Group Inc (MTFG) and Sumitomo Trust and Banking Co Ltd - have forecast group net profits but would likely fall prey to a worsening economy and higher risks of corporate failures. Stepped-up government inspections on lending to troubled firms have forced banks to be more strict in their lending assessment, thus increasing bank credit costs, the analysts said. To compound damage to their earnings, the stock market's close at an 18-year low for a fiscal year-end last week left many banks with big losses on their shareholdings, though the damage was not as bad as feared due to a market rebound. The Nihon Keizai Shimbun business daily said today MTFG, which has forecast a net profit of 20 billion yen ($150 million), is expected to cut its projection to a deficit of more than 100 billion yen on losses from bad-debt clean-ups. The daily said Sumitomo Trust is expected to report a consolidated net loss of tens of billions of yen and reduce its seven yen annual dividend for common shares. The paper said Sumitomo Trust, which so far has forecast a group net profit of 22 billion yen, is expected to cut its earnings forecasts as early as this week. Spokesmen at both banks said nothing had been decided yet. Analysts said it was evident banks were under pressure to conduct a better assessment of lending risks when the Financial Services Agency last autumn began special inspections into Japan's top banks to improve its grasp of the bad-debt problem. When banks announced interim earnings in November, top banks sharply raised their full-year credit costs to a total of 6.447 trillion yen ($48.58 billion), triple the original estimates. Because of deepening deflation and rising bankruptcies since then, analysts said the tally for top-bank credit costs could increase by another one trillion yen. "Prospects that all top banks will post full-year losses have already been factored in," said Arito Ono, senior economist at Fuji Research Institute. "Banks have taken a preventive step (by boosting provisions) and forecast conservative earnings, but I don't think this would significantly affect their capital adequacy ratios," he said. Preliminary estimates by the top banks showed they secured a capital adequacy ratio of at least 10 percent for 2001-02, well above the eight percent required for globally operating banks. Financial services minister Hakuo Yanagisawa has said the FSA plans to release the results of the special inspections it conducted over the past several months by mid-April. The Nihon Keizai said the FSA could publicise the results on April 12. On the same day, top banks would likely release key financial data incorporating the effects of the FSA's special inspections, including bad-debt clean-up costs, capital adequacy ratios, latent securities losses, net operating profit, current profit or loss and net profit or loss, the newspaper said. Banks and the FSA would not comment on the timing or content of the expected disclosure. MTFG, seen as one of the healthiest among the top four banks, had expected its loan-loss charges to total 480 billion yen while Sumitomo Trust, one of the smaller top banks, had expected about 80 billion yen in losses from the clean-up of bad debts. The newspaper said MTFG's loan-loss charges would increase by more than 120 billion yen and for Sumitomo Trust the costs would expand by about 20 billion yen. Mizuho Holdings Inc, Sumitomo Mitsui Banking Corp, UFJ Holdings Inc, Daiwa Bank Holdings Inc and Chuo Mitsui Trust and Banking Co Ltd have already said they expect net losses for the full year. The banks also took in their stride an end to the national blanket guarantee on deposits from April 1. According to a Reuters poll of 63 market players, only eight percent said they expected the change in deposit protection to trigger bank failures due to runs on deposits. MTFG shares closed Thursday trade up 1.38 percent at 807,000 yen. Copyright © 2002 Times Internet Limited. All rights reserved.
