Sumitomo Bank and Sakura Bank returned to the black in fiscal 1999, partly due to gains from sales of stocks and fewer bad-loan writeoffs compared to the year before, according to their earnings reports released Monday.

On an unconsolidated basis, Sumitomo -- which will merge with Sakura in April -- posted 176.4 billion yen in pretax profit for the year that ended March 31, compared to the 741 billion yen loss for fiscal 1998.

The profit came despite the 680 billion yen the bank wrote off in bad loans. The size of writeoffs is smaller than the 1.072 trillion yen it logged a year before but is still more than five times the bank's original estimate announced a year ago. At the end of fiscal 1998, Sumitomo estimated its bad loan disposal for fiscal 1999 would be 120 billion yen.

Bank officials explained that the size of writeoffs -- which include putting up loan loss reserves and selling loan claims -- increased because the deterioration in borrowers' conditions exceeded their original estimate. The bank has also made a "more conservative" estimate in its loan loss reserves to prepare for the upcoming merger with Sakura, the officials said.

Like other banks, Sumitomo used gains from the sale of its securities -- totaling 551.2 billion yen -- to cover its costs for the writeoffs. The upturn in the stock market toward March helped the bank realize gains on its stock portfolios, the officials said.

Regarding net business profits, a key measurement of performance for Japanese banks, the bank posted 350.5 billion yen, up from the 220.1 billion yen reported the previous year.

Net business profits show income from lending, bond dealings and other banking operations before subtracting expenses related to loan-loss reserves and taxes.

Sakura Bank, meanwhile, reported an unconsolidated 159.9 billion yen in pretax profits, compared to the 754.1 billion yen loss logged for fiscal 1998.

Sakura's net business profit also surged to 328 billion yen, nearly double the 172.9 billion yen marked the year before. The bank officials attributed the figure in part to expanded spreads between banks' borrowing and lending interest rates.

The bank wrote off a total of 449.9 billion yen in nonperforming loans, down from the 1.023 trillion yen in fiscal 1998. Sakura reported sales of stocks totaling 406.3 billion yen to partly cover the bad-loan writeoffs.

Both banks said that the newly introduced tax by the Tokyo Metropolitan Government will weigh heavily on their earnings.

The estimated total of the tax for the next five years -- which will be levied against the gross operating profit of major banks -- will come to 45 billion yen for Sakura and 35 billion yen or 40 billion yen for Sumitomo, the officials said.

Life creditors upbeat

Fuji Bank, Toyo Trust & Banking Co. and Mitsubishi Trust & Banking Corp. said Monday they expect few adverse effects on their earnings from the failure of Life Co. because they have secured collateral for their loans to the major consumer credit company.

Yasuda Trust & Banking Co., a Fuji subsidiary, also has enough collateral to cover its claims, Fuji Bank said.

Life applied to the Tokyo District Court on Friday for protection from creditors under the corporate rehabilitation law. The company has liabilities of 966.3 billion yen.

Fuji said its outstanding loans to Life total 46.07 billion yen, Yasuda has claims totaling 19.19 billion yen, Toyo Trust is owed 8.16 billion yen and Mitsubishi Trust has outstanding loans of 33.20 billion yen.