Japanese banks raise bad loan provisions in restructuring push

Plans to clean up balance sheets at Japanese banks has had a widely muted impact on the credit market, despite concern that some banks may run a loss in the full year ending March 2003 as a result of their more drastic restructuring plans. Japan’s four largest banks announced on Monday more aggressive plans to dispose of their non-performing loans at the same time they released financial results for the six months ended September 30.

United Financial of Japan, considered to be the weakest of the four, said provisions for bad loans would likely reach ¥480 billion for the year ending March 31, 2003. Mizuho’s provisions are expected to reach ¥1,040 billion, Mitsubishi Tokyo Financial, which owns Bank of Tokyo Mitsubishi (BOTM), sees provisions rising to ¥460 billion, and Sumitomo Mitsui Banking Corporation (SBMC) expects provisions to be ¥700 billion.

The backdrop of the higher provisions is, however, a drop in Japan’s non