The economic recession and tumbling stock market forced most of Japan’s major banking groups to report losses in the business year that ended in March.
On Tuesday, Mitsubishi UFJ Financial Group Inc. reported a group net loss of ¥256.9 billion in the 2008 business year, in stark contrast with the net profit of ¥636.62 billion it posted a year earlier.
MUFG said it spent ¥608.4 billion to write off bad loans for the year, while its shareholdings took a ¥408.7 billion hit. For the current year to March 2010, it is forecasting a net profit of ¥300 billion.
While banks are not likely to suffer further heavy losses this year from their shareholdings, some analysts predict ongoing economic stagnation may weigh on the lenders as they write off further bad debts.
“With some exceptions, banks went deep into the red for the first time in several business years,” said Masahiko Watanabe, senior director at Fitch Ratings Ltd.
Watanabe said the financial crisis triggered deterioration of the real economy, which increased corporate bad loans.
He also pointed out that falling stock prices hurt the banking groups, which continue to own substantial shares in their trading companies.
The combined credit costs for the three main banking groups reached ¥1.86 trillion, up from ¥580.6 billion a year earlier.
Mizuho Financial Group Inc. booked ¥539.3 billion in credit costs and logged ¥444.2 billion in losses from tumbling stock prices.
Sumitomo Mitsui Financial Group Inc. said it incurred ¥550 billion in credit costs and ¥223.1 billion in losses from its shareholdings.
Resona Holdings Inc. posted credit costs of ¥163.9 billion.
As a result, the combined net loss of the four banking groups reached ¥1.2 trillion. Only Resona posted a net profit of ¥123.9 billion.
Watanabe said business results for the banking groups in business 2009 will largely depend on economic conditions. “Everyone is hoping for a recovery in the latter half of the year,” he said.
Watanabe said the worsening economy could put further pressure on banks with nonperforming loans, leading to a dropoff in lending and further deterioration of corporate businesses and more restructuring.