Two major banking groups that announced their earnings results for fiscal 2000 Thursday showed diverging strategies as they strove to balance mounting bad loans with immediate earnings.

After briefly emerging above water last year, the three banks of the Mitsubishi Tokyo Financial Group let unconsolidated pretax profits dive 226.9 billion yen into the red for fiscal 2000, after tallying bad-loan writeoffs of 741.3 billion yen.

The writeoffs were roughly twice the amount projected at the beginning of the year.

The banks reported combined pretax profits of 334.7 billion yen the previous year.

On a parent-only-basis, the Bank of Tokyo-Mitsubishi, its subsidiary Nippon Trust Bank and Mitsubishi Trust & Banking Corp., marked 4.5 trillion yen as outstanding problem loans for the year to March 31. This was 1.4 times the amount reported for the previous business year.

The three banks joined under a holding company in April to form MTFG.

Officials said last year that problem loans had peaked. But a flurry of failures among small and midsize businesses and stricter categorization of risk-managed loans necessitated the large writeoffs.

Bank Officials are now saying that the stricter standards will help alleviate the bad loan mess once and for all.

They are also predicting pretax profits of 180 billion yen on a parent-only basis for this business year.

“In hindsight, I don’t mean to say that there was no laxness (in risk assessment) in the past,” said Tatsunori Imagawa, BTM managing director. BTM re-examined interest rates charged to customers to see if they were in keeping with the risks, he said.

Bad-loan writeoffs include loss reserves for risk loans and selloffs of collateralized properties. The government has pledged to direct banks to write off problem loans as losses and erase them from their balance sheets within three years.

Meanwhile, net business profit for MTFG fell to 562.3 billion yen. Net business profit represents a bank’s income from lending, bond dealings and other core operations before subtracting expenses related to loan-loss reserves and taxes.

While the MTFG group emphasized that it was “the safest” bank, the two banks that merged in April to form the Sumitomo Mitsui Banking Corp. focused more on their profits.

SMBC announced gains of 6.8 percent to 359.2 billion yen in unconsolidated pretax profit for fiscal 2000.

The two banks showed declines in bad loan writeoffs, at the same time that they hastened the so-called final disposal of problem loans.

Sumitomo Bank wrote off 558 billion yen, down 18 percent from the previous year, while Sakura Bank wrote off 261 billion yen, down 42 percent from the previous year.

“Banks have to be doctors to ailing companies, their patients,” Masayuki Oku, senior managing director of SMBC said. “They need to be able to be strict with their patients so that they recover.

“If a patient is already dead, however, doctors can’t bring the dead back to life.”

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