Mitsubishi UFJ Financial Group, Japan's largest bank, posted a 49 percent drop in first-half profit on Wednesday, hit by subprime-related investments and hefty losses at its credit card unit.
The bank kept its recently lowered full-year forecast and said its exposure to products related to the deteriorating subprime loan market stood at 260 billion yen ($2.4 billion) as of the end of October, unchanged from September.
Although Japanese lenders have fewer investments in securities related to risky U.S. mortgages than overseas rivals, they have not escaped unscathed.
The credit crisis has forced them to write down the value of subprime-related holdings and other assets. Earnings at Japan's second- and third-largest banks, Mizuho Financial Group and Sumitomo Mitsui Financial Group, have also been hit.
"There is probably better value in other parts of the market that have suffered on the back of these subprime concerns," said Marc Desmidt, head of the portfolio management group at BlackRock Japan.
"We need to have confidence that (Japan's banks) really understand the extent of their liabilities, that they've been transparent, and that they've made adequate provisions."
Ties to consumer lenders have also hurt MUFG and other banks, after tougher government regulation cut industry profits.
MUFG's credit card affiliate, Mitsubishi UFJ Nicos, has said it expects a net loss of 112 billion yen for the year to March, due in part to restructuring costs.
For the six months to Sept. 30, MUFG said group net profit fell to 256.7 billion yen ($2.34 billion), from 507.3 billion a year earlier.
The result was widely expected after the bank said last month it would fall short of both its first-half and full-year estimates, hurt by its subprime exposure and losses at the credit card unit. MUFG last month cut its first-half estimate by 30 percent to 245 billion.
For the full year, the bank stuck to its recently lowered forecast for a net profit of 600 billion, or a 32 percent decline from the previous year.
That compares with a market consensus of 648.4 billion yen in a poll of six analysts by Reuters Estimates.