Mizuho's $16B writeoff sets pace on bad loans


Japan's laggard economy has spelled trouble for its lenders, but investors are warming to a tougher stance on loans

By staff and wire reports

TOKYO, Japan -- Mizuho Holdings Inc., the world's biggest bank by assets, on Monday posted a net loss of 264.6 billion yen ($2.1 billion) for the first six months of the business year.

Mizuho jollied Japan watchers by announcing it will write off two trillion yen in bad loans this business year, which runs through March -- up from its previous estimate of 1.03 trillion yen.

The bank joined many of Japan's biggest banks in forecasting of red ink for the year. It expects a net loss of 720 billion yen ($5.79 billion), it said Monday.

But not all of them are ratcheting up the pressure on dud lenders. Mitsubishi Tokyo Financial Group, Japan's third-biggest bank, still forecasts a profit.

Slight rise from forecast for MTFG

It said Monday it expects to scrape into the black with a net profit of 20 billion yen ($161 million) for the fiscal year through March.

Mitsubishi said it would increase loan writeoffs only slightly, taking a 480 billion charge for the year through March. That's up modestly from its previous estimate of 450 billion yen and a 40 percent drop from last year.

Still, investors have been encouraged by these moves as Japan's banks go through earnings season. Bank-stock gains fired the benchmark Nikkei index ahead 3.4 percent. It ended at 11,064.30, its highest level in three months.

Mizuho's earnings came after the end of trade. But investors predicted a tougher stance on loan writeoffs. Mizuho's stock ended the day up 2.58 percent at 358,000 yen.

New president for Mizuho

As expected, the bank confirmed that Terunobu Maeda, a Fuji Bank vice president, will take over as president of Mizuho, replacing Katsuyuki Sugita.

The change will occur by April, when the bank rearranges into two portions: a retail bank aimed at individuals and small business, and a commercial bank aimed at big companies.

Mizuho was formed in September 2000 when Fuji Bank joined forces with Dai-Ichi Kangyo Bank and the Industrial Bank of Japan.

Mizuho's gains rallied other bank stocks. Mitsubishi Tokyo's stock climbed 0.67 percent to end at 901,000 yen.

It said Monday its bad loans stand at 4.6 trillion yen in all, as defined by Japanese bank rules.

Private analysts say the problems at Japan's banks may run deeper than official statistics show, because of a large amount of "gray area" loans.

Asahi, Daiwa announce losses

The grocery store Mycal became one of the biggest corporate failures when it collapsed in September. Its loans were not classified as problem debts by its lenders. Mizuho's Dai-Ichi was the biggest.

Mizuho said it had 5.6 trillion yen in problem loans on its books as of the end of September. With portfolios looking similarly shaky at other banks, reform-minded investors have pushed for banks to attack the problem.

Sumotimo Mitsui Banking Corp., Japan's second-largest bank, said last week it would take 1 trillion yen ($8.2 billion) in bad-loan writeoffs this year.

Asahi Bank got things rolling at the start of last week, saying it would take a 400 billion yen ($3.2 billion) hit from problem debts and predicting a loss for the year.

On Monday Asahi, one of the shakiest "city banks," posted a net loss of 40.98 billion yen for the first six months. It forecast a net loss of 530 yen for the entire year.

Asahi is trying to tackle its bad debts before merging with Daiwa Bank by the end of the business year.

Daiwa Bank on Monday said it would write off 172 billion yen ($1.38 billion) in loans this business year out of a total of 899 billion yen in problem loans.

Daiwa stock also rose on the day, ending up 3.6 percent at 116 yen ahead of its announcement. Asahi gained 1.94 percent to 105 yen.