HONG KONG - Japan's biggest bank, Mitsubishi UFJ Financial Group, revealed Monday that its losses in the U.S. subprime mortgage market had ballooned to 30 billion yen ($263 million) over two months, six times more than previously announced.
Mitsubishi UFJ (nyse: MTU - news - people ) first reported in August that it would have to write off 5 billion yen ($44 million) in losses from its 280 billion yen ($2.5 billion) exposure to subprime-related investments in the United States as of the end of July. Clearly, the situation has worsened.
"We are expecting to see that the amount of the losses had risen to a level of between 20 billion and 30 billion yen by the end of September," said a Mitsubishi UFJ spokesman who declined to be named.
As a result of the increased subprime impairments as well as losses at its credit card unit, Mitsubishi UFJ Nicos, the big bank is likely to fall 25% short of its full-year profit forecast of 800 billion yen ($7 billion), the newspaper Mainichi Shimbun reported Sunday. Mitsubishi UFJ Nicos said last month that it would report a consolidated net loss of 119 billion yen ($1 billion) for the year to March, attributable to restructuring costs and increased reserves for interest repayments.
Although Japanese lenders so far have reported relatively little exposure to subprime-related investments in the United States, Japan's Financial Services Agency has launched probes into the investment portfolios of Japanese banks and securities houses. It wants to assess the impact of the recent credit crunch among Japanese financial institutions before the releases of their April-September earnings reports, Jiji Press reported earlier, citing unnamed sources in the agency. Major Japanese lenders and brokerages are estimated to have a combined 1 trillion yen ($8.8 billion) of exposure to subprime-related investments, according to the official investigation.
Mitsubishi UFJ is the latest Japanese lender to announce greater than expected losses from subprime exposure in the past few weeks. Nomura Holdings (nyse: NMR - news - people ), Japan's largest brokerage, said in mid-October it would post a consolidated pretax loss of around 40 billion to 60 billion yen ($350 to $525 million) in its second quarter as a result of losing 73 billion yen ($634 million) on U.S. home mortgage-backed securities. The securities firm said it would close its U.S. residential mortgage-backed securities unit and cut its regional head count from roughly 1,300 to 900. (See: " Nomura Falls On Retreat From U.S. Mortgage Market")
-- Thomson Financial News contributed |
