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Mizuho Financial to Take $3.9 Billion Subprime Loss

Japan's Mizuho Financial Group on Friday cut its earnings estimate for the year just ended for a third time, hurt by $3.9 billion of subprime trading losses at its brokerage unit.

Although Asian lenders have so far avoided the massive write-downs that have crippled overseas rivals such as UBS and Merrill Lynch, Mizuho is one of the region's bigger subprime casualties.

Unlike other banks in Asia, where subprime exposure is largely limited to straight investment, Mizuho arranged structured products and other risky investments through its brokerage, analysts have said.

Mizuho's shares, which have lost about half their value over the last 12 months, were little changed in early afternoon trade.

"Investors have been expecting further subprime-related losses, so this doesn't come as much of a surprise," said Shigemi Nonaka, special adviser at Polestar Investment Management. "Japan's subprime exposure is still relatively small. You can't compare this to the likes of UBS."

Japan's second-largest bank said it now expects a net profit of 310 billion yen (US$3.1 billion) for the year to March 2008, down nearly 60 percent from its original estimate of 750 billion yen.

Trading losses on securitised products at unlisted Mizuho Securities topped 400 billion yen ($3.9 billion) in the year just ended, with more than half of that coming in the final three months of the year, the bank said.

That will likely push the brokerage to a net loss of 420 billion yen for the business year just ended, with 220 billion of that from the January-March fourth quarter, the bank said.

Mizuho spokeswoman Masako Shiono declined to comment about further subprime losses at the banking group.

Subprime Exposure

Investments related to troubled U.S. housing loans have cost global financial institutions as much as $215 billion as of December, but less than 7 percent of that has come from Asia, according to estimates by Japan's regulatory Financial Services Agency.

The FSA estimates Japan's subprime-related exposure at about 1.5 trillion yen ($14.7 billion), less than half of what UBS has so far written down.

Mizuho's shares have lost about 50 percent over the last 12 months, pushing the bank's market capitalisation below that of smaller rival Sumitomo Mitsui Financial Group.

The subprime damage has also forced the bank to push back a planned merger of Mizuho Securities and Mizuho affiliate Shinko Securities by at least a year, to 2009.