4 japanese banks report loss of $31 bill us

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    4 Leading Japanese Banks Report $31 Billion in Losses

    OKYO, May 26 — Japan's four largest banks today reported a combined loss of 3.6 trillion yen, or about $31 billion, for the last fiscal year, a 28 percent increase, because of declining stock prices and stricter accounting methods that unearthed more bad loans.

    The losses were largely within expectations, but did little to comfort investors who say Japan's bad-loan crisis is far from over. While the banks wrote off 30 percent fewer bad loans compared with the previous year, deflation is accelerating, the stock market remains near 20-year lows and the economy is inching toward another recession.


    The harsher environment on top of deep losses has made it more difficult for the banks to generate profits from their lending business. Yet the banks, as in years past, expect to return to profitability in the current fiscal year, which runs through next March. They also plan to write off fewer bad loans, though they still hold 17.5 trillion yen, or about $149 billion, in loans that are in arrears.

    In the fiscal year that ended in March, Mizuho Financial Group Inc., the world's largest bank by assets, lost 2.38 trillion yen, or about $20.3 billion, a record for a Japanese company. Sumitomo Mitsui Financial Group Inc., Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc. posted far smaller losses, writing off a combined 4.5 trillion yen, or about $38 billion in nonperforming loans.

    This fiscal year, Mizuho said it expects to earn 220 billion yen, while Sumitomo Mitsui and UFJ Holdings each expect 150 billion yen in earnings. Mitsubishi Tokyo anticipates a 190 billion yen profit.

    "We think our bad loans have passed their peak," Shigemitsu Miki, the president of Mitsubishi Tokyo, told reporters. "Unless the stock market declines drastically, it seems we will be able to post a profit this year."

    Serious questions remain, though, about the soundness of the banks' capital. Credits known as deferred tax assets make up about half of the core capital held by Japan's four big banks, an extremely high rate by international standards. These credits are based on the banks' forecasts for future growth, which analysts say are too optimistic.

    Auditors confirmed those suspicions last week when they refused to approve the way Resona Holdings calculated its tax credits. The rejection forced Resona, Japan's fifth-largest lender, to ask the government for a bailout that is expected to exceed 2 trillion yen. While regulators insist the four largest banks still have enough capital to pay for their write-offs and still meet international standards, many experts believe other lenders may be forced to accept government assistance.

    "While it's good that the banks have made substantial progress reducing their bad loans, there are still questions about how they are using their D.T.A.'s," said Hironari Nozaki, a bank analyst at HSBC Securities in Tokyo. "More government money might still have to be used to help the banks."

    The Resona bailout has turned into a major problem for Prime Minister Junichiro Koizumi and his chief financial regulator, Heizo Takenaka, who have come under fire for not doing more to prevent Resona from sliding into trouble.

    Financial regulators have been reluctant to use more public funds to help the banks because doing so would show that the last major bailout, in 1999, had failed. At that time, the government gave 9.3 trillion yen to the banks in return for preferred shares. The Bank of Tokyo-Mitsubishi and Mitsubishi Trust & Banking are the only major banks that have repaid the government.

    Worse, the value of the preferred shares the government received from the banks has declined by an estimated 2.5 trillion yen.

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