Mitsubishi Tokyo Financial Group, the nation’s third-largest banking group, is projecting a 145 billion yen consolidated net loss for the 2001 business year, hit by larger-than-expected credit costs and share price falls.
It had been projecting a 20 billion yen net gain.
Credit costs are projected to rise to 685 billion yen, 42.7 percent higher than the 480 billion yen announced in November. MTFG Senior Managing Director Tadahiko Fujino blamed the stagnant economy for rising loan-loss charges, as well as losses overseas incurred by the failure of large companies, such as U.S. energy giant Enron Corp., and by Argentina’s default on its obligations.
He said that financial regulators’ so-called special inspections of banks to see whether they have set aside adequate loan-loss reserves against possible failures were not a major factor.
“Our standards for credit costs have not changed. They have always been strict,” Fujino said.
MTFG’s projections come after similar forecasts by other banks ahead of the Financial Services Agency’s announcement of its on-site inspections results, slated for Friday.
Last week, Sumitomo Mitsui Banking Corp. announced it expects its consolidated net loss to grow from 150 billion yen projected in November to 480 billion yen.
Sumitomo Trust & Banking Co. also said that it will go into the red with a net 42 billion yen loss instead of a 22 billion yen gain, due to heavy appraisal costs on its securities holdings.
MTFG further expects realized portfolio losses of 102 billion yen, down from the 30 billion yen profit MTFG had at the end of September.
MTFG’s pretax earnings projection remains unchanged at 3.7 trillion yen, but its pretax losses will grow from 145 billion yen to 310 billion yen.
The banking group’s capital adequacy ratio is expected to stand at a little over 10 percent, meaning it will have capital equal to 10 percent of its assets judged to be at risk. Under rules set by the Bank for International Settlements, globally operating banks are required to achieve a capital adequacy ratio of at least 8 percent.
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