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.
"We have to be very, very cautious about regional banks," said Yuichi Chiguchi, a fund manager at DLIBJ Asset Management in Tokyo. "It's obvious that small and midsize real estate firms are in trouble over funding."