Mizuho seeks cash; Asia, Europe banks show losses

TOKYO/DUBLIN (Reuters) - Japan's Mizuho Financial Group (8411.T) joined banks around the world raising new capital on Thursday as lenders from Australia to Ireland warned of tough times ahead in a deepening financial crisis.

Mizuho, Japan's second biggest bank, plans to raise up to $3.1 billion after unveiling a $402 million quarterly loss.

It joins a host of banks building a bigger capital cushion to absorb future losses, as earnings are in retreat across the sector in Asia, Europe and the United States and bad debts are set to rise as the credit crisis spreads to the real economy.

Bank of Ireland's (BKIR.I) profits fell by a third and it canceled its cash dividend to shore up its capital. The bank said a sharp downturn in Ireland's property market will see losses on bad loans jump next year.

French bank Natixis (CNAT.PA) reported a worse than expected loss late on Wednesday and said its core investment banking unit had endured a torrid October.

The United States said it would not use a $700 billion bailout fund to cleanse bank balance sheets of bad mortgage debt.

U.S. Treasury Secretary Henry Paulson said he preferred instead to focus on buying stakes in banks to encourage them to increase lending.

The move pushed a subprime mortgage index lower late on Wednesday, and could cut the value of structured credit assets held by banks, but analysts said the shift to providing capital rather than taking on bad assets had been clear for some time.

The DJ Stoxx European bank index .SX7P was down 1.9 percent by 7:50 a.m. EST, with British banks hit particularly hard by worsening economic data. Asian banks had fallen earlier.

Shares in Commonwealth Bank of Australia (CBA.AX) fell 6 percent to a four year low after it warned investors to expect a big jump in bad debts and raised concerns over the outlook for at least the next 18 months.

Asia-Pacific lenders have largely avoided the heavy losses on subprime mortgages that tore through Wall Street, but a weakening economy and plunging equity markets have taken a toll on the sector and forced Mizuho and others to raise funds.

"By boosting their capital, the banks will have more money to lend out. Whether or not they have anyone to lend the money to, that's another story," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

BAD DEBTS RISING

Mizuho followed in the footsteps of larger rival Mitsubishi UFJ Financial Group (8306.T), which said last month it would raise $10.5 billion to offset stock market losses.

Mizuho shares fell 6.6 percent. The bank has lost more than half its stock market value this year.

South Korean lenders are also planning to lift their capital ratios by selling bonds, according to the country's top financial regulator. The government will set up a new $7.2 billion state fund to invest in bonds.

Fallout from the crisis has devastated bank earnings around the world and there were scant signs of a recovery.

CBA, which recently bought fellow Australian bank BankWest from troubled UK player HBOS HBOS.L, said growing bad debt charges would make a major dent in its half-year earnings.

It blamed failed Wall Street investment bank Lehman Brothers (LEHMQ.PK) and two collapsed local firms for much of the forecast increase in bad debt provisions.

Japan's Aozora Bank (8304.T) was likely to become the country's first big bank to forecast an annual net loss, the Nikkei reported.

Bank of Ireland said its core tier 1 capital ratio increased to 6.3 percent by September, but that would still lag most European rivals after recent fundraisings across the continent.

The bank said it did not need to raise funds and aims to increase its capital cushion by retaining earnings, shrinking the balance sheet and selling assets, helping its shares add 1 percent as there had been worries it would raise extra capital.

"We feel a 3 billion euro-plus recapitalization to be desirable for this bank," said Alex Potter, analyst at Collins Stewart.

Shares in Italy's biggest bank Intesa Sanpaolo (ISP.MI) rose 5 percent and rival UniCredit (CRDI.MI) added 3 percent as investors were encouraged by their decisions to skip cash dividends to boost capital.

But UBS (UBSN.VX) was among the bruised, falling 4 percent after U.S. authorities charged the Swiss bank's wealth management boss with helping Americans hide $20 billion to put Swiss bank secrecy laws in the spotlight again.

Swiss insurer Zurich Financial Services (ZURN.VX) reported a below-forecast 15 percent drop in its nine-month business operating profit to $4.2 billion, partly due to capital losses.

(Additional reporting by Yumiko Nishitani in TOKYO, Kim Yeon-hee in SEOUL, Mette Fraende in SYDNEY, Jo Winterbottom in MILAN, Lisa Jucca in ZURICH; Writing by Lincoln Feast and Steve Slater, Editing by Ian Geoghegan and Andrew Callus)