Japan's top three banks to book $1.9b loss on Tepco shares

Japan's top three banks are planning to book a combined loss of ¥160 billion ($1.9 billion) on their stakes in Tokyo Electric Power, whose shares have tumbled sharply due to the crisis at its crippled nuclear plant, sources said on Wednesday.

Shares of Tokyo Electric have slumped nearly 80 per cent since the March 11 earthquake and tsunami tore through its Fukushima Daiichi plant, forcing the banks to reassess the value of their shares for the financial year ended March 31.

Shares of all three banks posted small gains in morning trade, brushing off news of the losses, which was first reported by the Yomiuri newspaper.

"I think the market has already factored in impairment losses on Tokyo Electric shares so it's no surprise," said Takehito Yamanaka, analyst at MF Global FXA Securities.

"I don't think those losses are big enough to force the banks to change their forecasts, though the market consensus on their earnings could be lowered."

Sumitomo Mitsui Financial Group (SMFG) will book the biggest valuation loss of about 80 billion yen, followed by Mizuho Financial Group at ¥50bn and Mitsubishi UFJ Financial Group (MUFG) at ¥30bn, sources at the there banks told Reuters.

The sources spoke on condition of anonymity because the losses have not been announced publicly. Officials for all three banks said nothing has been decided and declined to comment further.

As of September 30, 2010, Sumitomo Mitsui Banking Corp, a core unit of SMFG, owned a 2.7 per cent stake in Tepco. Mizuho Coporate Bank, a unit of Mizuho, held 1.8 per cent of the troubled utility.

Mainly due to expected losses on Tokyo Electric shares, Credit Suisse had on Tuesday cutting its rating on SMFG to "neutral" from "outperform" while lowering its net profit estimate for the year ended March by 108 billion yen to 485.9 billion yen.

SMFG's own forecast is for a net profit of ¥540bn, double the prior year's level. MUFG and Mizuho are both estimating a net profit of ¥500bn.

Credit Suisse cut its net profit estimate for MUFG to ¥503bn from 574.2bn and that for Mizuho to ¥432.4bn from ¥514.9bn, while keeping a "neutral" rating on both shares.

Last month, the three banks made a total ¥1.4 trillion in emergency loans to Tepco, which is struggling to bring the nuclear plant under control and is bracing for a massive bill to compensate local residents and businesses.

Shares of SMFG were up 0.3 per cent, while MUFG gained 0.3 per cent and Mizuho rose 1.6 per cent. The benchmark Nikkei average was up 1.4 per cent.