Japan’s biggest bank reports 58% profit tumble

Mitsubishi UFJ, Japan’s biggest bank, and Mizuho Financial Group yesterday reported double-digit tumbles in first-half net profit, due partly to declines in their stock holdings. Mitsubishi saw its profit in the six months to September dive 58 percent to 290.4 billion yen ($3.6 billion), compared to 696.09 billion in the same period last year. Revenue in the period fell 11.7 percent from a year earlier to 2.35 trillion yen, but the megabank kept a 670 billion yen full-year profit forecast unchanged. Because Japanese banks have traditionally held big stakes in their affiliates and clients to cement ties, they are vulnerable to stock market declines, which could force them to book valuation losses on their holdings. Still, major banks continued to post gains from bond-trading activities, which have been a key contributor to profits in recent years. A big chunk of Mitsubishi UFJ’s year-earlier profits rise was due to its switching preferred shares in Morgan Stanley to common shares. Mitsubishi owns a piece of Morgan Stanley after throwing a $9.0 billion lifeline to the troubled Wall Street giant in 2008 during the financial crisis. The Japanese bank said Wednesday that weak markets saw the value of its stock holdings tumble, but added that its exposure to debt-hit Europe was minimal, with no holdings of Greek or Irish government bonds. “Exposures to Spain and Italy were mainly for infrastructure, such as electricity, gas and telecommunications,” Mitsubishi said in a statement. “(There were) limited exposures to financial institutions,” it added. Mizuho also pointed to shrinking stock holdings, saying its first-half net profit fell 27.6 percent year-on-year to 184.3 billion yen. But the lender added that its operating profit rose 11.4 percent to 285.7 billion yen on sales of 1.4 trillion yen, 7.6 percent higher on-year. It kept its net profit forecast for the fiscal year at 500.0 billion yen. Rival Sumitomo Mitsui Financial Group, however, bucked the downward trend, with a 5.5 percent profit rise to 331 billion yen largely owing to the addition of a new subsidiary, as profits from domestic lending dipped. Sumitomo, which also pointed to a drop in the value of its stock holdings, upped its annual net profit forecast by 4.1 percent to 540 billion yen. The trio’s full-year earnings were on track to fall short of the nearly 2.0 trillion yen in combined profits they reported in the last fiscal year, the largest since the global financial crisis. Japanese banks have been ramping up their overseas operations at a time when European financial institutions have been forced to scale back their businesses as markets fret about the eurozone’s fiscal woes. Mitsubishi UFJ, which has a presence in the United States through its retail banking unit California-based Union Bank, agreed earlier this year to acquire Pacific Capital Bancorp for about $1.5 billion.