Mizuho Financial Group said it would raise up to 800 billion yen ($8.4 billion) in new capital, after reporting a third-straight quarterly loss, hit by a sharp recession and the tumbling value of its stock holdings. Japan's second largest bank on Friday reported a $5.6 billion loss for the January-March quarter, while rival Sumitomo Mitsui Financial Group, Japan's No 3 bank by assets, also posted a $4.80 billion loss.
Mizuho's announcement marks the latest scramble by a major Japanese bank to raise more capital. Mizuho, Sumitomo Mitsui, and industry leader Mitsubishi UFJ Financial Group have announced they will raise as much as $41 billion combined to shore up their balance sheets.
Mizuho said on Friday that it would issue up to 600 billion yen in new shares through a public offering and the bank's president told a news conference it could raise as much as 200 billion yen through preferred securities. Both Mizuho and Sumitomo Mitsui forecast modest recoveries in the current year, betting on lower bad-loan costs and less damage from their shareholdings.
However, Mizuho may see slack appetite for its offering, after Sumitomo Mitsui said last month it would issue up to 800 billion yen in new shares, analysts said. Sumitomo Mitsui followed that announcement up with a successfully bid for Citigroup's Japanese brokerage "We have to worry about the saturation of the market - whether or not the market can absorb another issuance," said Ismael Pili, an analyst at Macquarie Capital Securities in Tokyo. Issuing 600 billion yen in new stock would dilute Mizuho's existing share value by 22 percent, a bank official said.
Mizuho posted a group net loss of 538.3 billion yen for the January-March quarter, more than six times bigger than a year earlier, Reuters calculations showed. The bank estimated a net profit of 200 billion yen for the current year, one-third higher than the average forecast of 149 billion yen in a Thomson Reuters poll of 14 analysts.
Sumitomo Mitsui reported a 456.9 billion yen quarterly loss, hit by the same economic downturn and slide in its shareholdings, but forecast a bigger-than-expected rebound. Banks around the world have rushed to raise cash after the financial crisis soured many of their investments. Ten of the 19 large US banks that underwent government "stress tests" were told to raise a combined $74.6 billion.
Asset sales have also been used to raise cash, with British bank Barclays Plc in talks to sell its asset management business, a source said on Friday. Japanese lenders take stakes in their corporate clients to seal business ties, a custom that has seen them hammered by a 35 percent fall in the benchmark Nikkei share average in the financial year to March 31.
Mizuho's stock-related losses for the quarter totalled 203.4 billion yen, while Sumitomo Mitsui lost 78.6 billion yen. Lenders have also been hurt by Japan's deepest recession since World War Two, which has raised credit costs, including the money set aside to cover bad loans.
Credit costs ballooned at both banks, with Sumitomo Mitsui losing 368.4 billion yen in the quarter. Both banks said they expect sharply lower credit costs in the new year. Both Mizuho and Sumitomo Mitsui's shares have halved over the last 12 months, making them some of the worst performers among the 84 banks listed on the Tokyo exchange's first section.