MUFG Falls on Report of $2.9 Billion Subprime Pain


Mitsubishi UFJ Financial Group, Japan's largest bank, may report an additional $2.9 billion in losses from the widening credit crisis, a newspaper reported on Wednesday, sending its shares down 4.3 percent.

Japanese banks have avoided the worst of the subprime meltdown, with the exception of Mizuho Financial Group, which has said it expects $5.5 billion in losses on risky investments tied to U.S. mortgages.

For its part, Mitsubishi UFJ has previously said that subprime-related losses would likely cost it 95 billion yen ($916 million) in the year that ended in March.

But the problem has now spread to other securitised products, triggering up to 300 billion yen ($2.9 billion) in paper losses and likely further squeezing the bank's earnings, the Mainichi newspaper said on Wednesday.

The company will disclose details of the losses on May 20, when it is due to report its earnings for the year that ended in March, the paper added.

MUFG spokesman Takashi Takeuchi declined to comment on the report.

Some analysts had previously expressed concern about the bank's investments in securitised products.

Graeme Knowd, bank analyst at CLSA Asia-Pacific Markets in Tokyo, told Reuters in an interview last month that he estimated MUFG had as much as 3 trillion yen parked in structured credit products outside of Japan.

"When the problem moves from subprime to just other stuff, they have more than anyone else (in Japan)," Knowd said.

Subprime investments have cost global financial institutions as much as $215 billion as of December, but less than 7 percent of that has come in Asia, according to estimates by Japan's regulatory Financial Services Agency.

So far, Mizuho, Japan's second-largest lender, has been among the region's biggest subprime casualties.

Unlike other banks in Asia, where credit exposure is limited to straight investment, Mizuho arranged structured products and other high-risk investments through its securities unit.

Structured instruments such as residential mortgage-backed securities (RMBS) are backed by a pool of loans or bonds with differing risk levels. Such products plunged in value as the U.S. housing market fell into a downward spiral.