Steve Quayle News Alerts

Jan. 23, 2003
By Yuka Yamaguchi and Taizo Hirose

Osaka, Japan, (Bloomberg) -- Resona Holdings Inc. will seek 100 billion yen ($844 million) from investors, the fourth of Japan's five biggest banks to try to raise cash after regulators threatened to seize lenders that are short of capital.

Bank of East Asia Ltd., Hong Kong's fourth-biggest bank, may be asked for funds, said Yasushi Kodama, a spokesman for Japan's fifth-biggest lender. He didn't disclose who else may invest.

Mizuho Holdings Inc. and three top rivals have announced plans to raise at least 1.35 trillion yen, or $11 billion, over the past month. Financial Services Minister Heizo Takenaka is forcing Japan's biggest banks, laden with more than 24 trillion yen of bad loans, to meet tougher standards on their loans and capital in the year ending March 31.

``We have yet to know whether banks such as Mizuho will be able to raise the amount of funds they have planned,'' said Yoshinobu Muraoka, who helps manage 60 billion yen at DL-IBJ Asset Management Co. ``It's not a time to be rushing to increase exposure in banking shares.''

Japan's economy may fall into its fourth recession in a decade, raising the prospect of loans going bad faster than banks can write them off.

Resona last month said bad-loan costs may swell two-thirds in the year to March 31, to 505 billion yen. That's based on its assessment of the impact of Takenaka's bank plans.

Japan's No. 2 lender, Sumitomo Mitsui Financial Group Inc., is raising 150 billion yen from Goldman Sachs Group Inc., and Merrill Lynch & Co. is investing 100 billion yen in a bad-loan venture with UFJ Holdings Inc., Japan's fourth-biggest bank.

Mizuho, the world's biggest bank by assets, this week said it would raise 1 trillion yen from investors as rising bad loans forced it to widen its loss forecast to the largest ever in Japan.

Hong Kong Links

Resona shares fell 2 yen, or 3.1 percent to 62 yen on the Tokyo Stock Exchange.

``Raising money is important, but it's more important for banks to use such investments to improve their profitability,'' said Seiichiro Iwamoto, who manages 100 billion yen in equities at Fuji Investment Management Co. ``We'll surely see more banks seeking more money.''

Resona released a statement saying it has yet to iron out details of the funding plan.

Bank of East Asia, which will next week sign a formal agreement to help Resona serve customers in China, will invest 3 billion yen in the Japanese bank, the Mainichi newspaper earlier reported.

Aside from the pact to work together in China, ``at the moment there is no other agreement or cooperation with Resona that has been finalized,'' said Salina Tong, a spokeswoman for the Hong Kong bank.

``In the longer term, it makes sense for Bank of East Asia and other Hong Kong banks to reach out to other regions for opportunities,'' said Alan Chan, who manages $300 million in Hong Kong and China stocks for BOCI-Prudential Asset Management Ltd. ``Where to go and how to do it would be another issue.''

Funding Plans

In March last year, Credit Agricole SA agreed to buy 5 percent of a trust unit owned by Resona, then called Daiwa Bank Holdings Inc., paying 87 million euros ($93 million).

Resona posted profit of 13.5 billion yen for the six months ended Sept. 30. On Nov. 25, it slashed its full-year profit forecast to 3 billion yen from 50 billion yen as it spent more to dispose of bad loans at its Kinki Osaka Bank Ltd. unit.

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