November 27, 2001	Tuesday	Ramazan 11, 1422

TOKYO, Nov 26: Japan’s top banks provided more evidence that they were knuckling down to their bad-loan problems on Monday, drastically raising their provisions against risky debt and scaling down their full-year earnings forecasts.

The nation’s two biggest banking groups, Mizuho Holdings and Sumitomo Mitsui Banking Corp, both doubled their loan-loss charge estimates for the year and forecast a slide into the red.

The third biggest, Mitsubishi Tokyo Financial Group (MTFG), became only the second top-eight bank to say it would squeeze out a profit for the full year to March 2002, but it too saw bleak times ahead.

Top banks are now expecting to take full-year loan-loss charges of 6.447 trillion yen ($51.83bn), above analysts’ estimates of around 6.0 trillion yen and more than triple the 1.9 trillion the banks had forecast back in May.

“There is a certain sense of achievement from these figures,” said Hironari Nozaki at HSBC Securities. “The sharp increase in loan-loss charges sets the stage for banks to deal with large, troubled borrowers in the second half.”

But as the economy lurches towards recession, bankruptcies are expected to rise and the provisions against lending that could go sour may have to be raised again, analysts said.

“Banks are at the limit,” said Muneyuki Tsuji at Japan Investment Trust Management Co Ltd. “We need an extra political push for a comprehensive economic package to stem deflation.”

Rating agency Fitch said on Monday it had cut Japan’s long-term local and foreign currency ratings to AA from AA-plus, with a negative outlook, saying: “Japan’s credit fundamentals continue to deteriorate.”

The nation’s top financial watchdog, the Financial Services Agency, gave the banks credit for the realism shown in the results season but urged them to brace for tougher times ahead.

“It does not mean that the problem has been resolved, because they are not only dealing with bad loans from the past but with loans that are becoming non-performing,” said FSA commissioner Shoji Mori. “They cannot avoid being affected by the near-term economic conditions.”

Mizuho, the world’s largest bank by assets, said it planned to book 2.0 trillion yen in loan-loss charges for the full business year to next March, compared with a prior estimate of 1.03 trillion yen for the current year.

That would leave it with a group net loss of 720 billion yen for the full year, it said, down from a 211 billion yen profit a year ago when it took a loan-loss hit of just 693.85 billion yen.

Mizuho also said its top management would step down in March to take responsibility for the dismal earnings and allow fresh faces to take over as the group reorganises.—Reuters