Magazine article American Banker

Rising Tide Lifts Japan's Banks

Magazine article American Banker

Rising Tide Lifts Japan's Banks

Article excerpt

Japanese bank stocks are rising, reflecting strength in the overall Tokyo market.

Since the start of the year, shares of Dai-Ichi Kangyo Bank, Japan's biggest, are up 10.2%. Sakura Bank's shares are up 18.3%, Fuji Bank's 10.6%, Sumitomo Bank's 9.9%, and Sanwa Bank's about 22%.

"It would seem that Japanese bank stock prices have hit their lows," said Thomas Hanley, analyst for First Boston Corp. "The outlook is continuing to be favorable."

"The Japanese banks are about 15 months behind U.S. bank stocks," Mr. Hanley added.

Different Story a Year Ago

The bullishness contrast with the sentiment of barely a year ago. At the time, analysts predicted Japanese banks would be pressed to meet the 8% minimum capital ratio required under international guidelines. Rising problem loans were also a concern.

But the rise in share prices and a sharp reduction in assets have dispelled many of those worries.

"With the Nikkei at 20,000, it would certainly mean that the ratio pressure is off," said John Leonard, an analyst with Salomon Brothers Inc.

Unofficial estimates recently published in the Japanese financial press show that risk-based capital ratios of all major Japanese banks are comfortably above the minimum.

The rise in the stock market has improved the value of the share portfolios used by Japanese banks to meet Tier 2 capital requirements.

But analysts warned that the banks are still short of Tier 1 capital, especially primary equity. …

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