Mitsubishi UFJ Financial Group Inc. had unrealized losses of about ¥5 billion on investments related to U.S. subprime loans as of the end of July.
Sumitomo Mitsui Financial Group Inc. said it recorded "several billion yen" in losses in the three months to June 30 after selling about ¥350 billion in U.S. mortgage-backed securities, including some backed by subprime loans.
While analysts said the losses are not a major source of concern, shares of the banks declined sharply Wednesday on the Tokyo Stock Exchange, with Mitsubishi UFJ falling to its lowest level in two years.
"The impact of subprime for Japanese banks is very limited, but the market keeps dumping the stocks," said Yoji Takeda of RBC Investment (Asia) Ltd.
Mitsubishi UFJ shares fell 5.3 percent, while Sumitomo Mitsui shares dropped 4.2 percent during the day's trading.
"The loss at Mitsubishi UFJ is not a great concern," said Keisuke Moriyama, a Tokyo-based analyst at Nomura Holdings Inc. "It's a small share of trading revenue."
Mitsubishi UFJ had a balance of ¥280 billion in subprime-backed securities, 97 percent of which had the highest triple-A credit rating, the bank said. Sumitomo Mitsui said it had an outstanding balance of ¥100 billion in securities backed by mortgage loans at the end of June.
Mizuho Financial Group Inc. said last week it recorded a loss of ¥600 million from selling most of its ¥50 billion in subprime-related holdings.
"The impact on bank earnings is limited," Nomura's Moriyama said. "'Hopefully with these announcements share prices will settle."
Moody's Investors Service and Standard & Poor's said Aug. 3 the mortgage impact on Asian banks had been "limited" and "manageable."