Japan's Mizuho stung by $5.5 bln in subprime pain

By David Dolan

TOKYO (Reuters) - Japan's Mizuho Financial Group Inc (8411.T: Quote, Profile, Research) cut a third off its earnings estimate for the year just ended, stung by $5.5 billion in subprime-related losses, mostly at its brokerage arm.

Mizuho's shares, which have lost about half their value over the past year, jumped 4.4 percent after Friday's announcement as investors bet the worst was over for the bank, although analysts say other Japanese lenders will have to reveal more losses.

Asian lenders have so far avoided the massive write-downs that crippled Western rivals such as UBS AG (UBSN.VX: Quote, Profile, Research) and Merrill Lynch & Co (MER.N: Quote, Profile, Research), but Mizuho is one of the region's bigger subprime casualties.

Unlike other banks in Asia, where credit exposure is largely limited to straight investment, Mizuho arranged structured products and other risky investments through its brokerage wing, analysts say.

"Investors have been expecting further subprime-related losses, so this doesn't come as much of a surprise," said Shigemi Nonaka, special adviser at Polestar Investment Management.

"Japan's subprime exposure is still relatively small. You can't compare this to the likes of UBS."

Japan's second-largest bank said it now expected a net profit of 310 billion yen ($3.1 billion) for the year to March 2008, down from a previous estimate of 480 billion yen. [nT11DMWOW5]

Mizuho had originally forecast a net profit of 750 billion yen for the year but has pared that number three times on spiralling subprime losses.