Big Japanese Banks' Subprime Losses Seen At $4.7 Bln

Big Japanese Banks' Subprime Losses Seen At $4.7 Bln


SAN FRANCISCO (Dow Jones) -- Japan's four biggest banks face 500 billion yen ( $4.7 billion) in losses associated with U.S. subprime mortgages in the current fiscal year through March 31, according to a published report

These losses represent nearly 30% of a combined 1.9 trillion yen in projected group net profit for the current fiscal year for Mitsubishi UFJ Financial Group Inc. (MTU), Mizuho Financial Group Inc. (MFG), Sumitomo Mitsui Financial Group Inc. and Sumitomo Trust & Banking Co. , the Nikkei reported on its Web site in a report dated Thursday.

Mizuho Corporate Bank, a unit of Mizuho Financial Group, faces tens of billions of yen in losses from its leveraged buyout financing operations in Europe. Groupwide subprime losses had been estimated at 170 billion yen for fiscal 2007, but the figure could hit 300 billion yen, according to Nikkei.

Mizuho Corporate Bank was one of the participants in the recapitalization of Merrill Lynch & Co.(MER), which received a capital injection totaling $6.6 billion from Asian and Middle Eastern investors after the bank unveiled its first quarterly loss since 1998 and slashed its dividend after its own significant subprime losses.

Japanese banks invested primarily in highly rated securitized products that incorporated the subprime loans as underlying assets. But ratings downgrades have sent prices plunging since November. The resulting turmoil has adversely affected other market segments not directly tied to these mortgages, the Japanese business daily reported.

Mitsubishi UFJ is expected to report roughly 50 billion yen in subprime- related losses for the nine months ended Dec. 31. The figure could grow to some 90 billion yen for the full year through March, Nikkei said.

The banking group logged 4 billion yen in such losses in the April-September half. In addition to 23 billion yen in valuation losses as of Oct. 31, the downgrade of an investment vehicle is seen widening losses by tens of billions of yen, the report said.

Mizuho Securities' losses from subprime related securitized products have increased, with the brokerage now expected to book 250 billion yen in subprime losses for the current fiscal year, Nikkei said.

Sumitomo Trust on Wednesday reported 29.9 billion yen in related losses for the April-December period, up from 9 billion yen in the fiscal half year that ended Sept 30. SMFG booked 99 billion yen in such losses over the same nine months.

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