CORRECTED - CORRECTED-WRAPUP 2-Profits fall at Japan banks as crisis bites

(In Nov 14 story, corrects paragraph 22 to show that overseas lending grew by more than a quarter, not nearly fivefold)

* Q2 profit halved at SMFG, Japan's No.3 bank

* SMFG President: No plan to raise capital now

* Rival Resona Q2 profit down 94 pct, Aozora has net loss

* SMFG shares end down 1.6 percent before results (Adds comment from SMFG President, details)

By David Dolan

TOKYO, Nov 14 (Reuters) - Sumitomo Mitsui Financial Group (8316.T) posted a 51 percent fall in quarterly profit as a looming recession triggers a jump in bad loans, but Japan's third-largest bank said it had no plans to follow its rivals in raising capital.

Sumitomo Mitsui, which took a 2 percent stake in Britain's Barclays (BARC.L) earlier this year, stuck to its recently lowered forecast for a 61 percent decline in profit this year.

The bank's profit slide matches that of other big Japanese banks, underscoring the bleak outlook for lenders in the world's second-largest economy as the global financial crisis hits growth.

Resona Holdings (8308.T), which is still nearly half-owned by the government following a public bailout, saw its net profit tumble 94 percent for the quarter, waylaid by rising bankruptcies among small-business borrowers.

Aozora Bank (8304.T), which is about one-third-owned by private equity firm Cerberus Capital Management [CBS.UL], posted its third net loss in four quarters and said it would fall to a loss for the year. [ID:nT142GHTIJ]

Once thought to be relatively unharmed by the global credit crisis, Japanese banks are now also scrambling to raise cash, as a sagging economy and over-exposure to plunging domestic stocks sap their capital.

Some analysts expect figures out next Monday to show Japan's economy has slid into recession, with anaemic growth at best for the latest quarter. [ID:nT36454]

"We will likely see more economic data indicating that the situation is getting worse," said Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute.

"For the past year the spotlight has been on losses on securitised products but now banks are facing a downturn in earnings from the economic slump."

The country's two largest banks, Mitsubishi UFJ Financial Group (8306.T) and Mizuho Financial Group (8411.T), have announced plans to raise as much as $13.5 billion between them to shore up their balance sheets.

However, Sumitomo Mitsui currently has no plan to raise capital, bank president Teisuke Kitayama told a news conference.

Sumitomo Mitsui said group net profit totalled 25.18 billion yen ($259 million) in the three months to the end of September, down from 50.9 billion yen a year earlier.

Reuters calculated the quarterly figures by subtracting the bank's first-quarter earnings from the first-half results released on Friday.

The bank stuck to its forecast for a full-year profit of 180 billion yen, compared with an average estimate of 212.3 billion yen in a poll of five analysts by Reuters Estimates.

Sumitomo Mitsui had originally forecast a full-year profit of 480 billion yen, but slashed that by 63 percent last month, citing widening bad-loan costs and losses on its stock holdings.

RISING BANKRUPTCIES

Japanese banks have been especially hurt by a surge in bankruptcies, which lead to higher bad loan costs, including bigger provisions for future losses.

Corporate bankruptcies hit a five-year high in debt terms in September due largely to the collapse of Lehman Brothers' local unit, according to data from Tokyo Shoko Research.

Credit costs more than doubled in the second quarter, to 188.2 billion yen, and Sumitomo Mitsui said it expected them to reach 370 billion yen at its core banking unit this year.

Growth in overseas lending was one of the few bright spots for the bank, helping push net interest income, a gauge of earnings from lending, up nearly 15 percent.

"There's a lot of demand for loans overseas," Sumitomo Mitsui's Kitayama said.

"However, risk management is very important."

Overseas loans totalled 10.8 trillion yen as of the end of September, more than a quarter increase from the end of March.

Stock holdings present another problem for Japanese banks, which generally hold big stakes in corporate clients as a means to strengthen their business relationships, making them sensitive to swings in the equity market.

The value of those stocks totalled more than $250 billion at the end of March, data from the Japan Bankers Association shows. Since then, Japan's TOPIX index of all first-section shares on the Tokyo stock market has fallen by 30 percent.

Resona, Japan's fourth-largest bank, booked a net profit of 4.75 billion yen for the latest quarter, down from 79.9 billion yen a year earlier, and stuck to its forecast for full-year profit to fall 47 percent to 160 billion yen.

Aozora reported a quarterly loss of 30.9 billion yen and said it will swing to a full-year loss of 27 billion yen, instead of its previously forecast profit of 15 billion yen.

Mizuho, Japan's second-largest bank, posted a quarterly loss on Thursday and said it will raise up to 300 billion yen.

Mitsubishi UFJ, Japan's largest bank, said last month it will raise up to 990 billion yen to replenish a capital base depleted by the falling stock market and an investment in Morgan Stanley (MS.N).

Sumitomo Mitsui's shares ended down 1.6 percent at 362,000 yen, compared with a 0.6 decline in Tokyo's index of bank stocks .IBNKS.T.

Shares of Sumitomo Mitsui have lost 57 percent so far this year, compared with a 45 percent slide in the bank stock index. (Additional reporting by Taiga Uranaka; Editing by Hugh Lawson)