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Thu, Aug 16, 2007 - Page 10 News List

Japan's MUFG stock slumps on news of loan losses


Shares in Japanese megabank Mitsubishi UFJ Financial Group (MUFG) fell heavily yesterday after the group said it had suffered about US$43 million losses on US subprime loans.

MUFG, the world's largest banking group by assets, said in a statement late on Tuesday that it had exposure of about ¥280 billion (US$2.4 billion) to securities backed by subprime loans to risky borrowers in the US.

As of the end of last month, losses on those assets had reached about ¥5 billion, MUFG said, adding that "the effect is limited."

Of the ¥280 billion exposure, about 97 percent is in low-risk "AAA" assets, it said.

Shares in MUFG fell by ¥50,000 or 4.4 percent to ¥1,090,000 in mid-morning trade.

small percentage

MUFG's losses so far are small compared with a net profit of ¥880.9 billion it made the last fiscal year to March.

The bank said its US subsidiary Union Bank of California was actively involved in housing loans but not in the subprime sector.

Concerns about the US subprime woes have caused havoc on financial markets across the world this month.

But top Japanese banks have relatively little risk of getting badly hit by defaults on loans in the US subprime mortgage market as they tend to be more conservative than their US and European peers, analysts say.

Major Japanese banks have a total exposure to US subprime loans of about ¥1 trillion, with losses likely to total slightly more than ?100 billion, which should not pose a major risk, UBS Securities estimated last month.

Shinsei Bank, Japan's first lender rescued by a foreign fund, has reported losses of US$29 million from exposure to the US subprime mortgage market.

other losses

Mizuho Financial Group, Japan's second-largest bank, said last week it had exposure of ¥50 billion to US subprime loans.

Third-ranked Sumitomo Mitsui Banking Corp has said it has exposure of ¥100 billion but mainly in high-grade products.

Nomura Holdings, Japan's biggest securities firm, said last month that it had lost ¥31.2 billion in the three months to June on subprime loans.

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