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Regional banks evaded most of the fallout from the U.S. mortgage market implosion only to face a homespun credit crisis.

Sixteen regional lenders, including Kansai Urban Banking Corp. and Yachiyo Bank Ltd., cut profit forecasts in the last two months as bankruptcies among condominium builders and commercial property companies forced them to set aside money for delinquent debt. Bad-loan cost ratios may rise by about 50 percent, HSBC Holdings PLC predicts.

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