Japan top banks report losses

TOKYO: Japan’s top banks posted big annual losses for the second year running on Monday, raising further worries about whether they have enough capital to cope with huge shareholding losses and the cost of cleaning up bad loans.

Resona Holdings, whose recent admission of capital problems sparked renewed concern about the sector, announced an 838 billion yen group loss, triple its forecast, ahead of closely watched results from the top four banks.

Investors and analysts are watching Monday’s results closely to see whether tough accounting rules that prompted the government to step in with a rescue plan for fifth-largest Resona are causing problems at other banks and raising systemic risks. Resona’s woes were magnified by what analysts saw as overly optimistic business forecasts and a high dependence on deferred tax assets (DTAs) — expected tax credits on loan-loss provisions — as capital.

Resona’s net loss was slightly lower than a year ago and it said it had 525.5 billion yen in core capital at the end of March, of which nearly all was DTAs. Resona’s auditors slashed the amount of DTAs the bank had planned to book by about 40 percent, accounting for two thirds of the decline in its capital adequacy ratio, which fell below four percent at end-March from previously forecast 6.5-6.9 percent.

Mitsui Trust Holdings, the smallest of the top seven banking group, posted an expanded loss after reassessing its profit projections and reviewing its capital quality in a sign that problems revealed by Resona are having a broad impact. Mitsui posted a 96.7 billion yen group net loss in fiscal 2002/03, after scaling down its DTAs by about 44 billion yen due to a stricter assessment of its earnings.

At the end of March, its core capital was 344.9 billion yen, made up almost entirely of DTAs. The group forecast a 75 billion yen in net profit this year.

Later on Monday, Mizuho Financial Group, the world’s biggest bank by assets, is expected to post an annual loss of well over two trillion yen, which would be the biggest loss in Japanese corporate history.

Sumitomo Trust & Banking Co Ltd, one of the smallest of the top seven groups but seen as relatively healthy, reported 73 billion yen in net losses. Sumitomo Trust has one of the lowest percentages of DTAs in its core capital — some 40 percent at the end of March. It said its core capital was 706.1 billion yen of which DTAs accounted for 279.4 billion yen. —Reuters

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