Sumitomo Mitsui Banking Corp. and other major banks are considering skipping interim dividend payments for the fiscal first half, as the continued drop in Tokyo stock prices has dealt a severe blow to their earnings, banking sources said Thursday.
But the banks are likely to pay dividends for the full year, which ends March 31, the sources said. The banks will decide on dividend policy based on stock prices at their interim book closing at the end of this month.
Starting at that time, banks must adopt a mark-to-market accounting rule. Under the new rule, the lenders are required to deduct from their core capital 60 percent of unrealized losses on their shareholdings, thereby cutting into capital resources to pay out dividends.
If the key Nikkei stock average ends September at the current level of just above 10,000, most banks will suffer appraisal losses on their stockholdings, making it almost certain they will see their core capital eroded for their interim book closing.
The situation will likely become even messier if some of their big borrowers go bust, forcing them to use more of their scant earnings to dispose of bad loans.
Against this backdrop, many banks are expected to skip interim dividend payments to save capital resources for the full-year book closing at the end of March, the sources said.
Asahi Bank, Chuo Mitsui Trust & Banking Co., Sumitomo Trust & Banking Co. and Sumitomo Mitsui are the most likely to skip on interim dividend payments, the sources said.
Mitsubishi Tokyo Financial Group Inc., UFJ Holdings Inc. and Daiwa Bank have already decided not to pay interim dividends. But Mizuho Holdings Inc. appears to be in a better position in terms of capital resources, the sources said.