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Japanese Megabank Slashes Forecast

October 2, 2001

TOKYO (AP) _ UFJ Holdings, one of Japan’s four biggest banks, said Tuesday it expects to report a loss of 65 billion yen ($540 million) for the fiscal first half that ended Sunday because of hefty losses on investments and write-offs for unrepaid loans.

UFJ Holdings _ the megabank formed by Sanwa Bank, Tokai Bank and Toyo Trust in April _ had previously projected a profit of 120 billion yen ($1 billion) for the April-September period.

The company will report its earnings results in late November.

The government estimates that Japanese banks are burdened with bad loans of 43 trillion yen ($357 billion) amid a deep economic slowdown. Private analysts fear that figure may be much higher.

Prime Minister Junichiro Koizumi’s administration is promising to clean up the bad debt crisis in the next three years. But worries are growing about the health of the nation’s financial sector as the slowdown worsens and Tokyo stock prices languish at 18-year lows. Japanese banks are major shareholders in other companies.

UFJ said its securities losses totaled 295 billion yen ($2.5 billion). Starting this year, Japanese banks must adopt new accounting rules that recognize appraisal losses on their shareholdings.

UFJ Holdings said it is expecting to write off 240 billion yen ($2 billion) in bad loans in the first half, up from 150 billion yen ($1.2 billion) forecast earlier.

In the fiscal year ending in March, the three UFJ banks posted a combined loss of 212 billion yen ($1.8 billion), writing off bad debts totaling more than 1 trillion yen ($8.3 billion).

Other major banks are reporting similar bad news.

Last Friday, Mitsubishi Tokyo Financial Group said it is projecting a group net loss of 70 billion yen ($581 million) for the first half of the fiscal year ended Sept. 30 mainly because of stock losses. Mizuho Holdings has also said it will likely post a 260 billion yen ($2.2 billion) loss for the first half.

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