Mitsubishi to rid itself of billions in bad loans

Japanese Mitsubishi Tokyo Financial Group plans to dispose of around Japanese yen 500 billion (US$3.94 billion) in bad loans this fiscal year, primarily by selling them to a government-backed debt collection agency, a major Japanese newspaper reported yesterday.

Saddled unprofitable investments and loans, the bank will sell most of the sour loans to the Resolution and Collection Corp in the year ending March 31, 2003, but is also considering auctioning some to investors, the national Mainichi newspaper said.

The report didn't cite sources.

The government estimates that Japanese banks have Y43 trillion (US$339 billion) in problem loans caused by plunging stock and property values since from the early 1990s. Analysts fear the actual figure may be much higher.

The bad loan problem hampers an economic recovery because it forces banks to cut lending.

Mitsubishi Tokyo Financial Group, created in April last year by the merger of Bank of Tokyo-Mitsubishi Ltd., Mitsubishi Trust and Banking Corp and Nippon Trust Bank Ltd., has said it expects a net loss of Japanese yen 145 billion (US$1.14 billion) for last year.