The top six banking groups’ record profits from 2005 are being criticized not only by customers who have put up with years of bad service and token interest rates, but also regional banks seriously affected by their advances.

Their combined net profits in the business year that ended in March reached 3.12 trillion yen, or 4.3 times that of the previous year, due to a business recovery and massive government bailouts to help the debt-ridden banks’ “restoration.”

Although the banks’ priority is improving their profitability, which is still weak, public pressure is expected to intensify.

Earlier this month, someone at a meeting of Himawariso-no-Kai, a group formed by victims of stolen or fabricated bank cash cards, said: “If business has recovered, what they should do first is to return their profits to the victims.” Twenty-five people attended the meeting.

A law protecting depositors that took effect in February obliges financial institutions to, in principle, pay victims the entire amount of savings stolen from them. But the relief measure is failing because some megabanks are offering to return only half the amount in civil suits.

“As banks are recovering with the people’s tax money, they have a public mission,” said Yumie Nakabayashi, representative of the group.

The Bank of Japan said that since the bubble economy collapsed around 1990, Japanese households have lost 304 trillion yen in income they would have received at normal interest rates.

The BUJ’s monetary policies, including the unorthodox zero-interest-rate policy, has lessened the burden on financial institutions at the expense of depositors, monetary analysts said.

In addition, a tax measure allowing for retained losses when disposing of bad loans allowed the Mitsubishi-UFJ, Mizuho and Sumitomo Mitsui financial groups to avoid paying corporate taxes in fiscal 2005.

“Although their settlements were good, they are still worthless,” Kaoru Yosano, state minister in charge of financial affairs, said of the megabanks Tuesday.

“Before anything, the priority was to return public money,” said Nobuo Kuroyanagi, president of Mitsubishi UFJ Financial Group Inc. Nearly 7 trillion yen was injected into the banks, but that has been reduced to 2 trillion yen.

Rather than returning the excess cash to depositors, each financial group has judged it more important to use the money to bolster their capital.

However, Kuroyanagi said, “After returning public money, we will have to return more to clients and shareholders.”

The president of a local bank in Kyushu was surprised to hear that a megabank offered one of his clients a loan with an annual interest rate of 0.8 percent. The normal rate is about 2 percent.

The president immediately cut his rate to 1.2 percent and managed to retain the client. “It is an important client. There was no other way,” he said.

Although the megabanks have recovered somewhat, Teisuke Kitayama, president of Sumitomo Mitsui Financial Group Inc., said: “Domestic banks are inferior in profitability” when compared with the top banks in Europe and North America.

The group is poised to actively advance into rural areas not strongly associated with banks.

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