Investors lashed out at executives of UFJ Holdings Inc. on Friday over the firm’s dismal performance and its alleged misconduct ahead of government inspections.

At an annual shareholders’ meeting in Tokyo, investors demanded that UFJ Holdings President Takeshi Sugihara and others in top management positions explain what had gone wrong.

“We are very sorry to have caused worry and disappointment among our shareholders,” Sugihara told the gathering, before being heckled by some of the 670 participants.

He stepped down after the meeting and was replaced by Ryosuke Tamakoshi.

UFJ, the nation’s fourth-largest banking group and seen as the weakest of the four, has been under pressure since posting a 402.8 yen billon loss for fiscal 2003. Just one month before the results were announced in May, the bank had forecast a return to the black, in line with its rivals.

The reversal in its fortunes came after the Financial Services Agency found that the bank had adopted an overly lenient assessment of its borrowers’ financial conditions.

The FSA ordered it to apply stricter standards and set aside more money for loan-loss provisions.

At Friday’s meeting, several investors asked management to elaborate on the matter. According to the bank executives, the lender had to increase loss provisions for loans made to large-lot borrowers.

Compared with its rivals, UFJ is said to have many problematic large-lot borrowers, such as supermarket chain Daiei Inc., condominium builder Daikyo Inc. and trading house Nissho Iwai-Nichimen Holdings Corp.

For UFJ, the successful turnaround of these struggling businesses is imperative to the process of reducing its bad loans. Management told investors that the bank is working with the companies to draw up revival plans.

Shareholders demanded that executives explain the misconduct pointed out by financial regulators. Last week, the FSA hit the bank with four business improvement orders.

The most serious charge is that UFJ obstructed FSA inspections by concealing documents that would have shown its borrowers in a worse financial light; covering up these documents was in effect an attempt to conceal the true extent of the lender’s bad loan situation.

While the executives reiterated that there was no deliberate obstruction of inspections, they apologized that the bank’s conduct was perceived as such.

At the end of the three-hour meeting, all of the company’s proposals, including skipping common share dividends for three consecutive years and appointing new board members, were approved by majority votes.

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