Indeks
Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., Japan's largest banks by revenue, cut profit forecasts by more than half after a slowing economy pushed bad-loan costs higher.
Mitsubishi UFJ reduced its estimate for net income in the year that ends March 31 by 66 percent to 220 billion yen ($2.3 billion). Mizuho cut its forecast by 55 percent. Resona Holdings Inc., Japan's fourth-largest bank by market value, also trimmed its profit projection.
Japan's five largest banks cut earnings estimates by a combined 1.16 trillion yen this month as the most severe global financial crisis since the Great Depression weakens Asia's largest economy. In addition, frozen credit markets and a 44 percent drop in the benchmark Nikkei 225 Stock Average this year are forcing them to book losses on investments.
``We can expect only worsening results across the industry,'' Kyong Sun Kong, an analyst at U.S.-based research and consulting firm Celent, said in a note to clients. ``The interim results don't yet reflect the deepening financial crisis of recent weeks, including likely substantial markdowns in securities held by banks.''
The Bank of Japan lowered its benchmark interest rate today, marking the first cut in borrowing costs in seven years, as the central bank sought to limit damage from the financial crisis. The Topix Banks Index tracking 84 Japanese lenders fell 3.8 percent, extending its decline this year to 45 percent.
MUFG Raises Capital
``The interest cut is generally bad for the banks,'' said Kristine Li, a banking analyst at KBC Securities in Tokyo. ``There is a chance that Japanese banks may have to cut the lending rate more than the deposit rate.''
Li rates Mitsubishi UFJ a ``sell'' and cut her rating on Sumitomo Mitsui Financial Group Inc., Japan's third-biggest bank by revenue, to ``sell'' from ``hold'' after the lender cut its full-year forecast 63 percent on Oct. 29.
Japan's largest banks have fared better than U.S. and European rivals during the global financial crisis, which forced Lehman Brothers Holdings Inc. into bankruptcy, saw Merrill Lynch & Co. sell itself to Bank of America Corp. and forced Morgan Stanley and Goldman Sachs Group Inc. to raise capital while they converted themselves into banks.
Global financial firms have recorded $685 billion in writedowns and credit costs related to the crisis, according to data compiled by Bloomberg. Japan's 672 deposit-taking institutions recorded about $16 billion in losses as of the end of June, according to the nation's financial regulator.
Investor Confidence `Blown Away'
A full-year profit of 220 billion yen would be Mitsubishi UFJ's smallest in six years, according to Bloomberg data. Bad- loan costs at its two banking units rose to 245 billion yen in the first half ended Sept. 30 from 150 billion yen a year earlier, the company said today.
After investing $9 billion in Morgan Stanley, the Tokyo- based bank said Oct. 27 it plans to sell as much as 990 billion yen of stock to replenish its capital. In addition to the Morgan Stanley investment, the company is taking control of a Californian affiliate, stretching its balance sheet.
``Mitsubishi UFJ has blown away investor confidence totally with its capital announcement,'' Li said. ``The bank had told investors it had enough capital to finance its investment.''
Mizuho and Sumitomo Mitsui may need to raise additional capital as well, to deal with investment losses amid the global financial crisis, Ryoji Yoshizawa, a credit analyst at Standard & Poor's in Tokyo, said in a Bloomberg Television interview today.
Banks in other Asian countries are also grappling with rising credit costs as slowing economies cause smaller exporters and construction companies to falter.
Beijing-based Bank of China Ltd., the nation's largest foreign-exchange lender, said Oct. 29 its quarterly profit rose at the slowest pace in two years as credit-market losses increased and loan demand declined in China.
Kookmin Bank, South Korea's largest, posted a bigger-than- expected drop in third-quarter profit on Oct. 30 as it set aside 342 billion won ($263 million) in bad-loan provisions.
Mitsubishi UFJ reduced its estimate for net income in the year that ends March 31 by 66 percent to 220 billion yen ($2.3 billion). Mizuho cut its forecast by 55 percent. Resona Holdings Inc., Japan's fourth-largest bank by market value, also trimmed its profit projection.
Japan's five largest banks cut earnings estimates by a combined 1.16 trillion yen this month as the most severe global financial crisis since the Great Depression weakens Asia's largest economy. In addition, frozen credit markets and a 44 percent drop in the benchmark Nikkei 225 Stock Average this year are forcing them to book losses on investments.
``We can expect only worsening results across the industry,'' Kyong Sun Kong, an analyst at U.S.-based research and consulting firm Celent, said in a note to clients. ``The interim results don't yet reflect the deepening financial crisis of recent weeks, including likely substantial markdowns in securities held by banks.''
The Bank of Japan lowered its benchmark interest rate today, marking the first cut in borrowing costs in seven years, as the central bank sought to limit damage from the financial crisis. The Topix Banks Index tracking 84 Japanese lenders fell 3.8 percent, extending its decline this year to 45 percent.
MUFG Raises Capital
``The interest cut is generally bad for the banks,'' said Kristine Li, a banking analyst at KBC Securities in Tokyo. ``There is a chance that Japanese banks may have to cut the lending rate more than the deposit rate.''
Li rates Mitsubishi UFJ a ``sell'' and cut her rating on Sumitomo Mitsui Financial Group Inc., Japan's third-biggest bank by revenue, to ``sell'' from ``hold'' after the lender cut its full-year forecast 63 percent on Oct. 29.
Japan's largest banks have fared better than U.S. and European rivals during the global financial crisis, which forced Lehman Brothers Holdings Inc. into bankruptcy, saw Merrill Lynch & Co. sell itself to Bank of America Corp. and forced Morgan Stanley and Goldman Sachs Group Inc. to raise capital while they converted themselves into banks.
Global financial firms have recorded $685 billion in writedowns and credit costs related to the crisis, according to data compiled by Bloomberg. Japan's 672 deposit-taking institutions recorded about $16 billion in losses as of the end of June, according to the nation's financial regulator.
Investor Confidence `Blown Away'
A full-year profit of 220 billion yen would be Mitsubishi UFJ's smallest in six years, according to Bloomberg data. Bad- loan costs at its two banking units rose to 245 billion yen in the first half ended Sept. 30 from 150 billion yen a year earlier, the company said today.
After investing $9 billion in Morgan Stanley, the Tokyo- based bank said Oct. 27 it plans to sell as much as 990 billion yen of stock to replenish its capital. In addition to the Morgan Stanley investment, the company is taking control of a Californian affiliate, stretching its balance sheet.
``Mitsubishi UFJ has blown away investor confidence totally with its capital announcement,'' Li said. ``The bank had told investors it had enough capital to finance its investment.''
Mizuho and Sumitomo Mitsui may need to raise additional capital as well, to deal with investment losses amid the global financial crisis, Ryoji Yoshizawa, a credit analyst at Standard & Poor's in Tokyo, said in a Bloomberg Television interview today.
Banks in other Asian countries are also grappling with rising credit costs as slowing economies cause smaller exporters and construction companies to falter.
Beijing-based Bank of China Ltd., the nation's largest foreign-exchange lender, said Oct. 29 its quarterly profit rose at the slowest pace in two years as credit-market losses increased and loan demand declined in China.
Kookmin Bank, South Korea's largest, posted a bigger-than- expected drop in third-quarter profit on Oct. 30 as it set aside 342 billion won ($263 million) in bad-loan provisions.
