MIZUHO Financial Group Inc and Mitsubishi UFJ Financial Group Inc reported a combined US$3 billion of third-quarter losses from mortgage investments, causing profits at Japan's two biggest banks to slump.
Mizuho, the nation's second-largest bank, booked 275 billion yen (US$2.6 billion) of subprime-related losses in the period and cut its full-year profit forecast by 26 percent yesterday.
Bigger Tokyo-based rival Mitsubishi UFJ lost 51 billion yen on similar assets and posted a 68-percent drop in third-quarter profit.
Losses from plummeting values of securities linked to US subprime mortgages have hurt Japanese banks already struggling to bolster loan growth as the economy heads toward a recession. Sumitomo Mitsui Financial Group Inc and Sumitomo Trust & Banking Co this week reported larger credit market losses than they forecast two months ago.
"Mizuho didn't know the risks and followed what US banks were doing," Edwin Merner, who oversees US$1 billion as president of Atlantis Investment Research Corp in Tokyo, told Bloomberg News. "Mitsubishi is slower at doing new things, and that was fortunate this time."
Japan has probably already fallen into a recession, ending the longest period of economic growth in more than 60 years, Goldman Sachs Group Inc economist Tetsufumi Yamakawa said this week. Lending by Japan's 10 so-called city banks, including Mitsubishi UFJ and Mizuho, fell 1.7 percent in December, the ninth straight monthly decline.
The two banks reported earnings in separate statements after the market closed. Mitsubishi UFJ fell 29 percent in Tokyo trading in the past year, and Mizuho slumped 43 percent, compared with the 32-percent decline of the 85-member Topix Banks Index.
Mitsubishi UFJ's profit dropped to 57.9 billion yen in the three months ended December 31. The bank's profit forecast of 600 billion yen for the fiscal year that ends March 31 was unchanged. Mizuho's net income fell 65 percent to 66 billion yen. The company forecast full-year profit of 480 billion yen.
Tokyo-based Mizuho this month invested US$1.2 billion in Merrill Lynch & Co, the US securities firm reeling from US$24.5 billion of mortgage-related losses and writedowns.