Top banks’ subprime losses hit ¥530 billion

Kyodo News

Japan’s six biggest banks posted ¥529.1 billion in losses linked to the U.S. subprime mortgage crisis at the end of December, up 4.6 times from the ¥115 billion they reported at the end of September, according to April-December earnings results posted as of Thursday.

All six groups, including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., reported drops in group net profit for the first nine months of fiscal 2007, with combined net profit plunging 44.2 percent from a year ago to ¥1.339 trillion.

The figures underscore the global nature of the subprime crisis, which has damaged earnings across Europe as well.

The six banks’ losses could rise by another ¥100 billion by the end of March, their projections show.

Four of the groups — Mitsubishi UFJ, Mizuho, Sumitomo Mitsui Financial Group Inc. and Sumitomo Trust & Banking Co. — booked subprime-related losses.

Mizuho’s subprime-related losses swelled from ¥70 billion at the end of September to ¥345 billion at the end of December — the largest among Japanese financial institutions.

Mitsubishi UFJ booked ¥55 billion in similar losses for the same period, up from ¥24 billion, and expects that to grow to ¥40 billion by the end of March.

For the April-December period, Mizuho posted a group net profit of ¥393 billion, down 32.2 percent from the year before.

It lowered its group net profit estimate for fiscal 2007 ending in March to ¥480 billion from a previous projection of ¥650 billion.

Among the other megabanks, Sumitomo Mitsui posted a 19.3 percent group net profit fall for the April-December period, while Sumitomo Trust suffered a 45.3 percent plunge. Resona Holdings Inc. and Chuo Mitsui Trust Holdings Inc. also posted drops in group net profit.

Nomura’s net 38% off

Nomura Holdings Inc., Japan’s largest brokerage, said Thursday its group net profit fell 37.7 percent in the first nine months of fiscal 2007 to ¥88.87 billion on sharply falling stock prices and a decline in investment banking deals.

Nomura’s performance provides new evidence that the global fallout from the U.S. subprime mortgage crisis has hit Japanese brokerages hard. Smaller rivals Daiwa Securities Group Inc. and key units of Nikko Cordial Corp. also reported similar drops in earnings earlier this week.

Using U.S. accounting standards, Nomura reported a 40.3 percent drop in pretax profit from a year ago to ¥142.46 billion in the April-December period, on revenue of ¥1.58 trillion, up 8.2 percent. In the domestic retail segment, pretax profit fell 5.4 percent to ¥111.3 billion, due partly to costs linked to the enhancement of customer call centers and information, and technology-related investment.

In the global markets segment covering sales and trading of various securities and investment products for mostly institutional customers, Nomura took a ¥17.2 billion pretax loss, reflecting losses linked to its exit from the U.S. mortgage-backed securities business, which was prompted by the U.S. housing market meltdown.

In the global investment banking business, Nomura posted a pretax profit of ¥22.5 billion, down 31.2 percent, on a drop in equity underwriting business.

“From a global standpoint, buyout funds’ activity has fallen significantly, leading to smaller volume of mergers and acquisition business,” Chief Financial Officer Masafumi Nakada told reporters.

“Frankly, the third quarter was quite tough,” Nakada said.

Referring to the stock market slumps that have continued into this year, Nakada said Nomura plans to work hard to meet customer needs by using its business assets and flexibly to deal with rapid changes in the business circumstances.

The brokerage said it will pay ¥8.5 dividend for the third quarter through the end of December, up from ¥8 a year earlier. Nomura has been paying quarterly dividends since fiscal 2006. It did not provide an earnings forecasts for the full year.