Writedowns squeeze Sumitomo
Sumitomo Mitsui Financial Group Inc's third-quarter profit fell after Japan's second-largest bank by market value wrote down the value of US mortgage investments by more than it predicted two months ago and as provisions for bad loans surged.
Net income declined 2.3 percent from a year earlier to 148.9 billion yen ($1.4 billion) in the three months ended Dec 31. Sumitomo recorded a 67 billion yen loss on securities and loans related to the US subprime market, it said in a statement yesterday.
"I expect more write-offs at Sumitomo Mitsui and other major banks like Mitsubishi UFJ and Mizuho," said Hiromichi Tsuyukubo, who helps manage about $800 million at Myojo Asset Management Japan Co in Tokyo, referring to rivals Mitsubishi UFJ Financial Group Inc and Mizuho Financial Group Inc.
Sumitomo Mitsui's writedown took mortgage-related losses at Japan's largest banks to $1.6 billion - a fraction of the $24.5 billion recorded by Merrill Lynch & Co. Sumitomo Mitsui, which has now written off about 90 percent of its subprime-related holdings, is interested in buying assets of US or European lenders, President Teisuke Kitayama said last month.
Bloomberg News calculated earnings by deducting first-half results from nine-month figures announced today. Sumitomo Mitsui in November forecast a 55 billion yen loss on investments linked to US subprime mortgages for the six months ending March 31.
Sumitomo Mitsui's third-quarter net interest income rose 6.8 percent to 292.6 billion yen billion yen from 274 billion yen a year earlier, according to calculations by Bloomberg. Net fees for the quarter rose 1.8 percent to 153.4 billion yen.
Costs for potential bad loans tripled to 94.9 billion yen for the quarter from 30.7 billion yen a year earlier, as the bank increased provisions for loans to smaller domestic companies. Sumitomo Mitsui had a 6.4 billion yen loss on stockholdings for the three months ended Dec 31, from a gain of 12.8 billion yen a year earlier.
Agencies
(China Daily 01/30/2008 page16)
