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Tue, May 27, 2003 - Page 12 News List

Both Mitsui and Sumitomo post losses for second year

BLOOMBERG , TOKYO

Sumitomo Trust & Banking Co and Mitsui Trust Holdings Inc, the smallest of Japan's seven major banks, posted losses for a second year, leaving them requiring a profit rebound, which they both predicted, to bolster capital.

Tokyo-based Sumitomo Trust had a group net loss of Japanese Yen 73 billion (US$624 million) for the year ended March 31, compared with a loss of ?42 billion a year earlier. The bank said it expects net income of Japanes Yen 44 billion this business year.

Mitsui Trust's net loss narrowed to Japanese Yen 96.7 billion from ?278 billion in the period. It predicted a Japanese Yen 75 billion profit for this fiscal year.

A return to profit is crucial for Japanese banks because their capital has been depleted by bad loan write-offs and stock- market declines. Resona Holdings Inc, Japan's fifth-largest bank, is seeking a government bailout because of a capital shortfall.

``Japanese banks have weak capital as highlighted by Resona, and never-ending bad-loan stories,'' said Masaru Ogawa, who helps manage US$2.4 billion in Asian equities at Aberdeen Asset Man-agement, and doesn't own any shares of Japanese lenders.

Resona said its net loss for the business year totaled ?837 billion, reiterating the number it gave on May 17 when it said it would seek public funds. Resona didn't provide a forecast for this business year.

Sumitomo Trust's loss cut its capital adequacy ratio, a measure of its viability, to 10.48 percent at the end of March, compared with 11.56 percent at the end of September of last year. The bank is required to keep the ratio above 8 percent.

Keeping the ratio above the minimum level may depend on how many tax credits banks can book to reflect their future profit outlook.

Resona's auditors slashed the amount of deferred tax assets it could book, draining a key source of capital.

Sumitomo Trust's deferred tax assets rose to Japanese Yen 279.4 billion in March from Japanese Yen 225.2 billion in September, reflecting its future profit estimates. Mitsui Trust's loss was almost double its previous forecast after it booked a fifth fewer tax credits than at the end of September.

Mitsui Trust booked Japanese Yen 344.6 billion of deferred tax assets on a group basis, from Japanese Yen 432 billion six months earlier.

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