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Monday, November 25, 2002

Japan Banks Claim to Tackle Non-Performing Loans

According to the Financial Times there are signs the pressure being put on Japan's banks to deal with their bad loans is starting to bear fruit in the fact that the country's largest lenders used the publication of their first half results to simultaneously announce more aggressive action to tackle the problem. my feeling is it would be better to adopt a wait-and-see approach on this before starting to cheer.

SMBC, Japan's second largest bank, increased its forecast for loan loss provisions for the full year from ¥500bn ($4.1bn) to ¥700bn, while UFJ, the fourth largest lender, said it would transfer ¥1,000bn in bad loans to a new group company. SMBC said net profit for the first half rose 61 per cent to ¥55bn and added it expected to report a ¥30bn profit for the full year. It incurred loan loss charges of ¥266bn for the six months compared to ¥1,540bn for FY2002. It said in the first half it wrote off bad loans worth ¥953bn and that it had bad loans worth ¥5,700bn left on its balance sheet, of which ¥3,000bn were loans to companies considered in danger of bankruptcy or already bankrupt. UFJ said it made a net profit of ¥72bn for the period compared to a loss of ¥67bn for the same period a year ago. It forecast a profit of ¥70bn for the full year and confirmed it would transfer ¥1,000bn in non-performing loans to a new company to be set up next March.

Mizuho, the world's largest bank in terms of assets, said net profits for the half dropped to ¥39bn compared to a loss of ¥264bn previously but said it now expected to make a loss of ¥220bn net loss for the full year. The bank added it had bad loans of ¥4,970bn at the end of September compared to ¥5,000bn at the end of March. It increased its forecast for loan loss charges from ¥600bn to ¥1,040bn. MTFG reported a group net loss for the first half of ¥188bn compared to ¥96bn for the same period last year. It cancelled its interim dividend and said it now expected to make a group net loss of ¥185bn for the full year. MTFG said it had problem loans worth ¥3,6800bn at the end of September compared to ¥4,270bn at the end of March.
Source: Financial Times

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