Japan's Mizuho says earnings halved by credit crisis
TOKYO (AFP) — Japan's second-largest bank Mizuho Financial Group said Thursday that its annual net profit had roughly halved amid heavy losses from the subprime loan crisis in the United States.
Mizuho has been the hardest hit so far of the Japanese banks by the credit crunch due to problems at its brokerage subsidiary, although its losses are still dwarfed by those of some of its foreign counterparts.
Net earnings fell to 311.22 billion yen (3.0 billion dollars) in the 12 months to March from 620.97 billion yen the previous financial year, the group said.
The figure was in line with the company's forecast in April, when it had issued its third profit warning in five months.
Mizuho said it suffered subprime-related losses of 645.0 billion yen (6.1 billion dollars) during the year because of financial market turmoil sparked by a wave of defaults on high-risk US mortgages.
About 300 billion of that came in the fiscal fourth quarter to March.
Group president Terunobu Maeda blamed "turmoil in the international financial market caused by the subprime loan problem" for the poor result.
He indicated he had no intention to step down over the profit tumble, saying he was responsible for turning the group's financial fortunes around.
The sharp fall in earnings came despite brisk top-line growth, with operating income up 10.3 percent at 4.52 trillion yen.
The group forecast a recovery in net profit to 560 billion yen this year, and in net business profits to 900 billion yen.
It expects to book credit-related costs of 120 billion yen this year due to the lingering effect of the subprime crisis, which led to a global credit squeeze as the banks became increasingly cautious about lending.
Many banks have posted huge losses as a result, with Swiss banking giant UBS one of the worst hit so far with writedowns of about 37 billion dollars.
Maeda said Mizuho's losses appear to have peaked but that it is not clear if the overall impact of the subprime crisis on financial markets has yet been revealed.
"It doesn't seem like the problems in the United States are over at all," he said.
Leading US and European banks have been hit with heavy losses after a wave of US defaults and home foreclosures undermined the value of billions of dollars' worth of mortgage-backed securities.
Critics say credit rating agencies failed to warn about the risks of those securities, keeping high ratings on them.
"What we learnt most from the losses is that credit ratings are not a panacea, and that buying financial products that have little liquidity is tricky when we want to sell them," Maeda said.
"We've reviewed the extent of our risk-taking this year," he said.
