Profit levels at most corporations declined for the first time in four years in the 1997 business year to March 31, with at least six of the nation’s nine giant “city banks” falling into the red, according to earnings results released through Friday.
Announcements peaked Friday, with more than 200 firms releasing their business results. To date, some 1,190 companies, about 80 percent of the companies listed on the Tokyo Stock Exchange, have reported their earnings results for the year. Combined pretax profits for all but financial institutions declined 2.3 percent from year-earlier levels, according to data compiled by Kyodo News.
Many companies reported poor earnings from their core businesses as a result of the prolonged economic slump and sagging stock prices. In addition, a series of writeoffs of bad loans weighed heavily on earnings at many corporations, such as giant trading houses and construction companies.
Most retailers reported drops in sales due to slack personal spending, and paper-pulp companies and shipbuilders also fell on hard times. But some export-dependent blue chip companies enjoyed windfall profits from a weaker yen, among them Toyota Motor Corp. and Sony Corp.
Many companies are bearish on their earnings projections for the current year to March 31, 1999, with combined pretax profits seen falling 2 percent.
Highlight of Friday’s announcements was the release of data from six of the nation’s nine city banks. All six said they went into the red due to the continued writeoff of nonperforming loans in efforts to improve their balance sheets.
The pretax losses ranged from 44.4 billion yen posted by Tokai Bank, to 917.5 billion yen registered by the Bank of Tokyo Mitsubishi. But of the six, only two — Tokai Bank and Asahi Bank — managed to log year-on-year gains in net business profits.
Only Asahi Bank will reduce dividends to shareholders. The other banks are maintaining that they have a commitment to ensure stable dividends andthat they expect earnings to improve during the current fiscal year. Asahi shaved off 1 yen per share.
The banks were intent on writing off nonperforming loans amassed during the bubble economy years so as to improve their financial standing ahead of further financial system deregulation. They maintained that the writeoff of the bulk of existing nonperforming loans was basically completed during the fiscal year.
Two other banks, Sumitomo and Daiwa, similarly reported pretax losses Thursday, and the remaining city bank, Sakura Bank, is to make its report public Monday.
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