Asahi Bank announced Friday that its efforts to write off 50 percent more of its nonperforming loans than initially targeted will result in a consolidated net loss of 10 billion yen for the business year ending March 31.
In addition, bank officials said Asahi will scale down all but its retail banking businesses.
It will cut 20 percent of its executive posts, slash executives’ salaries and close 15 percent of its offices by the end of March 2003, officials said.
It will also “speedily” reduce its securities holdings by two-thirds to 1 trillion yen and cut its current workforce of 9,500 by 2,000 by March 2006.
“We don’t want to be a miniature version of a megabank,” said Tetsuo Kubo, executive officer and general manager of Asahi Bank’s Planning Division.
“We will reduce the volume of our loans to large corporations so that they make up 10 percent of our domestic asset-based business . . . by fiscal 2005 at the very latest.”
Currently, loans of this kind account for roughly 16 percent of the bank’s asset-based business.
Earlier this month, the Financial Services Agency called on the midsize bank to conduct a stricter evaluation of its bad loans. This was after an inspection had revealed how its assets had deteriorated as a result of declining earnings at borrowers and price falls in real estate used as collateral for the bank’s loans.
In response, Asahi raised its amount of loan-loss reserves set aside for bad loans by 110 billion yen, raising its total amount of writeoffs from a projected 200 to 310 billion yen.
This has reduced Asahi’s forecast of unconsolidated pretax profits of 50 billion yen to a projected loss of 13 billion yen.
Asahi executives said the firm is considering withdrawing from overseas operations and closing all of its 19 overseas offices. A final decision will be made in fiscal 2001, which begins April 1, they said. Sources at the bank said earlier in the day that Asahi will transfer its overseas operations to the Bank of Tokyo-Mitsubishi.
A withdrawal of this kind would enable the bank to circumvent the minimum capital adequacy ratio of 8 percent required for an internationally active bank. It would also make it possible for the firm to tap into part of its capital to finance the disposal of bad loans.
“Our strength is in high attention to detailed service,” Kubo said. “We can offer three times the service currently provided by employing more female staff (in retail), since they have annual salaries of 3 million yen as opposed to male staff with salaries of 10 million yen,” he added.
“We need to measure whether the high cost of maintaining an overseas presence is causing us to restrict our loans to small and medium size businesses,” he said.
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