Resona Holdings Inc. said Wednesday that it expects to post a group net loss of 185 billion yen for the current fiscal year, as it writes off more of its loans as losses.
The projected loss marks a huge turnaround from the 3 billion yen profit Resona forecast in November. The group comprises Daiwa Bank, Asahi Bank and two regionals.
Like its larger counterparts, the nation’s fifth largest banking group also announced plans to raise funds to bolster its weak finances by March 31. It expects to bring in 100 billion yen by selling preferred securities to Hong Kong’s Bank of East Asia, France’s Credit Agricole S.A. and several domestic firms.
As part of those efforts, Resona hopes to expand its partnership with Bank of East Asia to expand its services in China, while enhancing ties with Credit Agricole S.A. in private banking.
Borrowers’ worsening finances combined with the banks’ stricter assessment of the quality of its loans are forcing Resona’s hand. Daiwa and Asahi now say they will put up a combined 365 billion yen against potential losses on bad loans. These loan-loss reserves are up from an earlier projection of 240 billion yen.
In addition, the slumping stock market will eat a 103 billion yen hole in the two major component banks’ profits.
Resona’s pretax gains from core operations will fall to 1.1 trillion yen from 1.3 trillion yen, erasing any dividends on common shares. It will, however, pay dividends on preferred shares. If the banking group does not pay dividends on the preferred shares, some of which are held by the government, it risks the shares being converted to common stocks — and falling under government control.
Management will take responsibility for the escalating losses through pay cuts, Resona Holdings President Yasuhisa Katsuta said.
“If stockholders say this job is too much for me and that I should step down, I will do so,” he said. “But my responsibility at the moment is to see through the banking group’s consolidation.”
As part of its restructuring efforts, the banking group also said it will trim a further 1,300 jobs by March 2007, bringing the planned cuts to 4,450, or 21 percent of the group’s employees as of the end of fiscal 2001. Resona said it may also cut severance pay and employee benefits.
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