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Japan's banks move on bad loans
By Alex Frew McMillan
TOKYO, Japan (CNN) -- Japan's Big Four banks are again trying to show they are prepared to get serious with problem debtors. They say they will take a hit of 2.6 trillion yen ($21.6 billion) this year to cull bad loans from their books. But those moves are drawing a skeptical reaction on Tuesday, with a key minister saying the banks have been "lazy" in sorting out their problems. The banks all reported first-half earnings on Monday, most of them returning to profit after hefty losses last year. But all bar one still forecast red ink for the year as they tackle bad debts. Criticism from ShiokawaConservative estimates set Japan's bad-loan tally at 52 trillion yen ($424 billion). The Big Four said they account for around a third of that tally, saying Monday they have a combined 19.4 trillion yen ($158 billion) in problem loans. New Financial Services Minister Heizo Takenaka has been pushing the banks to speed up their handling of that mountain of financial woe, a move that would reassure overseas investors. But in the short term, it means a likely rise in business failures and the jobless rate, and significant pain for the banks themselves. Finance Minister Masajuro Shiokawa on Tuesday reacted angrily to the moves announced by the banks in their earnings, faulting them for suggesting they are only acting because they are under political pressure. The big banks did report a 10 percent drop in the bad loans on their balance sheets. But they should have acted earlier to trim that tally, according to the minister. "Such a thing has been common sense for centuries and it just shows that managers of today have been lazy and haven't done what they have to do," he said, according to Reuters news agency. Stocks tread water
The market has not been particularly impressed, either. Stock in Mizuho Holdings is down 3.82 percent to 126,000 yen by noon on Tuesday. Sumitomo Mitsui Banking Corp. (SMBC) is flat at 391 yen, with Mitsubishi Tokyo Financial Group (MTFG) basically level, inching forward 0.14 percent to 711,000 yen. The exception is UFJ Holdings, up 4.35 percent to 120,000 yen after a 7 percent rise the day before. It is switching 1 trillion yen in bad loans out to a separate entity. Analysts said they got few signs of significant progress from the banks. Jason Rogers, director of credit research at Barclays Capital, said the half-year earnings "provide very little new insight into the banking groups' financial strength and prospects." He is waiting for details of Takenaka's bank plan, due later in the week, but says even that may provide little in the way of detail on the government's plan to inject public funds into the sector. SMBC alone in predicting a profitOn Monday, Mizuho, the world's largest bank by assets, said it will take 1.04 trillion yen ($8.5 billion) in charges this year to write off bad loans. That was close to double its previous forecasts. Mizuho, which posted a profit of 39.0 billion yen ($317 million) for the first six months, is finally back to black ink. But it still forecasts a loss for the year, and is cutting salaries by 10 percent and closing branches to trim costs. (Full story) SMBC, the second-largest bank in Japan, is the only one of the Big Four to forecast a profit for the year. It netted 55.2 billion yen ($448.2 million) for the first half. (Full story) But SMBC also wrote off 266.3 billion yen ($2.2 billion) in bad debts and said it will take a problem-loan hit of 700 billion yen ($5.73 billion) for the year, up 40 percent from its previous forecast. MTFG, Japan's No. 3 bank and seen as its best-run, was the only one of the Big Four to post a loss for the first six months of the business year. MTFG, which booked 192.41 billion yen in charges to clean up bad loans, recorded a net loss of 188.1 billion yen ($1.54 billion) and forecast red ink for the year. (Full story) Trimming its tally this yearThe bank was alone, though, in reducing its forecast for writing off bad loans for the full year. It has acted earlier than its peers and is generally conservative in its lending. It now expects to shed 460 billion yen ($3.75 billion), down from an earlier prediction of 570 billion yen. To help fund that, it will sell 563 billion yen in stock holdings it has in its customers in the second half of the year. UFJ Holdings, the weakest of the Big Four, squeezed a 72.6 billion yen ($592 million) profit for the first half, coming back from a loss the year before. (Full story) It didn't change its forecast for loan writeoffs but expects to shed a total of 480 billion yen ($3.92 billion) for the full year. UFJ announced the most sweeping measures to deal with its bad loans, saying it will transfer 1 trillion yen to a new group company being set up in March. That will seek around 100 billion in investment from outside investors. SMBC on Monday reported the highest level of bad loans, at 5.70 trillion yen, closely followed by smaller UFJ at 5.02 trillion yen. Mizuho identified 4.97 trillion yen in problem assets, with MTFG in the best position with 3.68 trillion yen in troubled debts.
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