Bad-Loan Balance At Major Banks Jumps 47% To Y27tln
Saturday, May 25, 2002
TOKYO (Nikkei)--The balance of bad-loans at 13 major banks increased 47.4%, or 8.7 trillion yen, on the year to 27.17 trillion yen as of March 31, according to their fiscal 2001 earnings results released Friday.
Despite aggressive efforts by banks to clean up their bad loans, stricter assessment guidelines and the deteriorating economy produced a new batch of nonperforming loans. Losses from bad-loan disposals topped 8 trillion yen, resulting in group net losses for all seven major banking groups comprised of the 13 banks.
Mitsubishi Tokyo Financial Group Inc. (8306) was the only bank to mark a drop in its bad-loan balance. Meantime, UFJ Holdings Inc. (8307) and Sumitomo Mitsui Banking Corp. (8318) saw their balances at more than double in size.
Furthermore, nonperforming loans accounted for 8.5% of all loans, a sign that banks' asset quality worsened.
In large part, the bad-loan balance increased due to factors such as the Financial Services Agency's special inspections that resulted in stricter assessments of major loans to ailing borrowers in sectors such as real estate. The sluggish economy also contributed to the emergence of new bad loans.
When a bank assesses a loan as gone bad, it sets up reserves against it to prepare for a potential default. In addition, many of the banks granted debt waivers and other measures as ways to support companies' rebuilding efforts. As a result, losses related to the elimination of bad loans totaled 8 trillion yen or so, double their core business profits.
In addition, the banks had to deal with unrealized losses in their shareholdings. The seven banking groups incurred a combined 4.29 trillion yen net loss on a consolidated basis.
As for this fiscal year, the 13 banks are projecting losses related to the disposal of bad loans to decline to less than one-third of last year's figure to 2.5 trillion yen.
Many of the banks such as Sumitomo Mitsui Banking said that they had almost completed their steps in fiscal 2001 to eliminate large bad loans.
As a result, "losses from the cleanup of bad loans this year will shrink significantly," said UFJ Holdings President Hideo Ogasawara.
But there are large gaps in how sound assets are at the different banks. All of the banks are predicting a return to profitability this fiscal year, but depending on asset quality and financial strength, some institutions may report losses.
(The Nihon Keizai Shimbun Saturday morning edition) |
