Sumitomo and Daiwa mop up bad debts
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Your support makes all the difference.TWO OF Japan's biggest banks, Sumitomo and Daiwa, yesterday announced that they had posted massive losses in the last business year to mop up a large part of their problem-loan mess.
They said, however, that their decision to take such bitter medicine would help them return to reasonable profits for the current business year to next March.
Sumitomo Bank Ltd, Japan's second-largest lender, said it lost 251.3 billion yen (pounds 1.16bn) in the year ended 31 March as it wrote off a record amount of bad debt.
Daiwa Bank Ltd, the nation's ninth-largest commercial lender, had group net income of 12.65bn yen, or 7.11 yen per share, after tax benefits were factored in. Before tax, write- offs drove the bank to a group current, or pre-tax, loss of 142.5bn yen.
Sumitomo and Daiwa, both based in Osaka, were the first of Japan's 19 nationwide lenders to report earnings. Most of the banks expect some of their worst results ever, as soaring bankruptcies and new government rules on assessing loans drive bad-loan write-offs to record levels.
Few analysts believe the banks' bad-loan problems are over. Yet the companies are more optimistic, saying that they are finally cleaning up balance sheets weighed down with billions of yen in bad loans, much of it from risky lending during Japan's "bubble economy'' almost a decade ago.
"We think our bad-loan write-offs have turned the corner,'' said Masayuki Oku, general manager of Sumitomo Bank's corporate planning department.
Sumitomo Bank, with 58 trillion yen in assets, wrote off 1.04 trillion yen in bad debt during the last business year. Daiwa Bank, which is about three times smaller, disposed of 389bn yen.
- Agencies
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