* Top three banks' H1 stock-related losses more than triple
vs yr ago
* Benchmark Nikkei index down 12 pct from April to September
* Domestic lending remains feeble, overseas growth strong
By Taiga Uranaka
TOKYO, Nov 14 Japan's three mega banks posted
earnings that were dragged down by heavy losses on their equity
portfolios, renewing investor concerns about the practice of
lenders holding stakes in clients including the country's
money-losing electronics makers.
Combined stock-related losses at Mitsubishi UFJ Financial
Group (MUFG), Mizuho Financial Group and
Sumitomo Mitsui Financial Group (SMFG) more than
tripled in April-September from a year earlier as the benchmark
Nikkei average declined 12 percent over the six-month period.
Shares in embattled Sharp Corp have plunged nearly
70 percent since the start of the fiscal year as the firm
struggled with competitive markets and a strong yen. Yet in
September, MUFG and Mizuho, which hold stakes in the troubled TV
maker, agreed to extend 360 billion yen ($4.53 billion) in
additional loans to the 100-year-old debt-ridden company.
"Although banks say they will make further reductions in
stock holdings, they are unlikely to drastically cut their
exposure in the short term as it's hard to sell stocks in this
market," Chikako Horiuchi, director at Fitch Ratings in Hong
Kong, said before the earnings announcements on Wednesday. "So,
their challenge is to come up with effective hedge measures."
While banks are bound by law to limit their holdings to
small stakes of under 5 percent, they have a large number of
holdings across many industries. That exposes them to the ups
and downs in the Japanese economy, which shrank in the September
quarter for the first time since last year.
Panasonic Corp is axing another 10,000 jobs by
end-March as its businesses continue to bleed money and its
shares languish at multidecade lows. Still, Japan's biggest
commercial employer managed to win $7.6 billion in loan
commitments last month from banks that include MUFG and SMFG.
Total stock-related losses at Mizuho, MUFG and SMFG widened
to 534.1 billion yen ($6.72 billion) in the fiscal first half
from 169.5 billion yen a year ago, their earnings reports show.
"We have been continuously reducing equity holding. It's a
shame that we had to book such large (stock-related losses),"
Mizuho President Yasuhiro Sato said at a news briefing. "It's
hard to find ways to sell clients' shares without affecting our
business with them."
In the quarter ended September, Mizuho's net income plunged
99.8 percent to 356 million yen, while MUFG, Japan's biggest
bank by assets, saw a 45 percent slump to 107.6 billion yen.
SMFG booked a profit increase of 99 percent to 213.2 billion
yen, helped by investment gains from the trading of government
Japan's big banks have shed billions of dollars of equity
holdings in the past decade to reduce their exposure to stock
market volatility. While the banks say publicly they will make
further cuts in their holdings, some executives privately
acknowledge they are slow in coming.
Outstanding loans by Japan's big banks fell for a 36th
straight month in October, Bank of Japan data shows, after the
country's economy shrank in July-September.
To counter a poor domestic loan book, SMFG, Mizuho and MUFG
have aggressively expanded overseas, and their efforts are
starting to pay off. The banks' overseas lending showed strong
growth in the first six months.
Earlier this year, SMFG acquired Royal Bank of Scotland's
aircraft leasing business for $7.3 billion.
In June, Mizuho said it had agreed to buy a Brazilian unit
of Germany's WestLB.
Shares of Mizuho have climbed some 17 percent this year,
while SMFG is up 10.5 percent and MUFG is 5.5 percent higher.
The three lenders have so far outperformed a 2.5 percent
gain in the benchmark Nikkei average
Japanese banks also dominate global project finance, with
MUFG ranking No.1 in the league table of mandated arrangers for
January-September, Thomson Reuters data shows. SMFG and Mizuho
held the No.3 and No.4 spots, respectively.