Lender's profit falls on unit loss
Mitsubishi UFJ Financial Group Inc, Japan's largest bank by market value, posted its biggest-ever profit decline on losses at a credit card unit and lower margins on loans to corporate clients.
Net income fell 52 percent to 245 billion yen ($2.1 billion) in the six months ended September 30, missing the company's May forecast of 350 billion yen, Mitsubishi UFJ said in a preliminary statement to the Tokyo exchange yesterday. It will also buy back up to 150 billion yen of its own shares, about 1.4 percent of issued stock, the bank said in a separate statement.
Japanese banks including Mitsubishi UFJ and Mizuho Financial Group Inc have struggled to lift earnings as lending growth failed to pick up, with interest rates stuck near zero percent and companies funding expansion with their own cash. Attempts to expand through capital alliances with consumer credit firms backfired after courts cut the interest rates they can charge.
"Mitsubishi UFJ and Mizuho are suffering the most from a decline in borrowing by cash-rich companies," said Shinichi Tamura, an analyst at UBS Securities Japan Ltd in Tokyo. "Overseas investors are selling off the banks because they can't see a growth story."
Credit card unit Mitsubishi UFJ Nicos Co last month forecast a full-year loss of 112 billion yen, seven times bigger than an earlier forecast of 15.5 billion yen. It cited provisions for restructuring and claims for interest refunds.
The bank will also book 5 billion yen in losses related to US subprime assets, or mortgages to riskier borrowers, it said. For the full year, the bank lowered its profit forecast to 600 billion yen from 800 billion yen.
The bank's shares lost 23 percent this year, tracking declines in the Topix Banks Index. Banks are the second-worst performers among the 33 industry groups on the benchmark Topix since January 1. Only consumer lenders fared worse.
Bloomberg News
(China Daily 11/01/2007 page15)
