Sumitomo Mitsui Financial Group said Thursday it will effect a much-needed capital boost worth some 210 billion yen by issuing preferred shares.
Japan's third-largest financial group by assets thus expects its capital adequacy ratio to rise to about 10 percent -- up 0.7 point from a previously estimated ratio of between 9 percent and 9.5 percent -- at the March 31 end of the current business year.
The funds will be raised through a third-party allotment of new preferred shares. Sources said SMFG will ask Sumitomo Life Insurance Co., Nippon Life Insurance Co., Mitsui Mutual Life Insurance Co. and Mitsui Sumitomo Insurance Co. to buy the shares.
While preferred shares carry no voting rights, the dividends on them are higher and paid prior to those on common shares.
The capital buildup follows SMFG's announcement last week that it would record a 240 billion yen group net loss for fiscal 2004, a reversal from the 180 billion yen net profit forecast in November.
The net loss was expected to lower its capital adequacy ratio to below 9.50 percent on March 31, compared with 10.93 percent as of Sept. 30.
SMFG made the revision after writing off more bad loans than planned, reportedly in response to a Financial Services Agency inspection. It expects its bad-loan disposal costs to total 950 billion yen for the year, up from the previously estimated 650 billion yen.
Information from Bloomberg, Kyodo added