Biggest Bank Makes Japan's Biggest Loss
Banking group Mizuho Holdings braced itself for the heaviest loss of a Japanese company as it responded yesterday to a renewed government assault on the country's bad loan problem. The world's biggest bank in terms of assets forecast a 1.95 trillion yen (£10bn) loss for the year...
Banking group Mizuho Holdings braced itself for the heaviest loss of a Japanese company as it responded yesterday to a renewed government assault on the country's bad loan problem.
The world's biggest bank in terms of assets forecast a 1.95 trillion yen (£10bn) loss for the year ending March 31, almost nine times previous estimates.
The huge downward revision is expected to be followed by other big Japanese banks, which have been forced to tighten up their assessments of non-performing loans under a strict regime imposed by Heizo Takenaka, head of the financial services agency.
Deflation and recession have been creating bad loans faster than the old ones can be written off, leaving the institutions with an estimated 52 trillion yen of soured assets. Concern about the banks' failure to deal with the problem, and threats of nationalisation by government and business leaders, have pushed the Mizuho share price down by 60% in the past three months.
To stem such fears before the March settlement of accounts, the financial sector's most jittery period, the bank said it would double its estimate of loan-loss charges to 2.03 trillion yen. This would be covered by selling 1 trillion yen of share-holdings and issuing about 1 trillion yen of equities to clients and foreign investors.
Mr Takenaka, who has identified the 12-year banking problem as the core of Japan's economic woes, said the write-off was a step in the right direction. "I find the series of moves to beef up capital meaningful because that shows our plan is gradually having its influence.
"We'll closely watch to see whether these efforts are strategic, sound and sincere."
In the short term, Mizuho's sale of a trillion yen worth of its shareholdings will add to the downward pressure on the Tokyo stock exchange, which lost 20% of its value last year to end December at its lowest level in almost 20 years. Nev ertheless investors gave a cautious thumbs up to the plan as a sign that Japan's banks and financial authorities may at last be getting serious about bad loans. Mizuho shares rose 4%, buying time for the bank to try to avoid nationalisation.
The world's biggest bank in terms of assets forecast a 1.95 trillion yen (£10bn) loss for the year ending March 31, almost nine times previous estimates.
The huge downward revision is expected to be followed by other big Japanese banks, which have been forced to tighten up their assessments of non-performing loans under a strict regime imposed by Heizo Takenaka, head of the financial services agency.
Deflation and recession have been creating bad loans faster than the old ones can be written off, leaving the institutions with an estimated 52 trillion yen of soured assets. Concern about the banks' failure to deal with the problem, and threats of nationalisation by government and business leaders, have pushed the Mizuho share price down by 60% in the past three months.
To stem such fears before the March settlement of accounts, the financial sector's most jittery period, the bank said it would double its estimate of loan-loss charges to 2.03 trillion yen. This would be covered by selling 1 trillion yen of share-holdings and issuing about 1 trillion yen of equities to clients and foreign investors.
Mr Takenaka, who has identified the 12-year banking problem as the core of Japan's economic woes, said the write-off was a step in the right direction. "I find the series of moves to beef up capital meaningful because that shows our plan is gradually having its influence.
"We'll closely watch to see whether these efforts are strategic, sound and sincere."
In the short term, Mizuho's sale of a trillion yen worth of its shareholdings will add to the downward pressure on the Tokyo stock exchange, which lost 20% of its value last year to end December at its lowest level in almost 20 years. Nev ertheless investors gave a cautious thumbs up to the plan as a sign that Japan's banks and financial authorities may at last be getting serious about bad loans. Mizuho shares rose 4%, buying time for the bank to try to avoid nationalisation.
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