Newspaper article The Evening Standard (London, England)

Why the Godzilla Banks Must Tread Carefully in Tokyo

Newspaper article The Evening Standard (London, England)

Why the Godzilla Banks Must Tread Carefully in Tokyo

Article excerpt


GODZILLA is being reborn in Tokyo's financial district. In fact, three Godzillas are about to start stomping about along with one that emerged last year.

The monsters will be Japan's new Big Four banking corporations, which will officially burst on to the global financial scene on 2 April.

The equally big question is whether these four will hold the solution to Japan's appalling banking problems or be just another part of the apocalypse.

Some analysts fear that if one of the supergroups gets into financial problems then the impact on the rest will be magnified by the mergers.

The first of the mammoths emerged in September of last year when Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan, were rolled into the Mizuho Financial Group.

On Monday, Sakura Bank and Sumitomo Bank will merge to create Sumitomo Mitsui, Bank of Tokyo-Mitsubishi and Mitsubishi Trust & Banking will form Mitsubishi Tokyo Financial Group, and Sanwa Bank, Tokai Bank and Tokyo Trust & Banking will be combined to create United Financial of Japan.

Mizuho, with assets of US$1.3 trillion ([pound]909 billion) is already one of the world's titans, but Sumitomo Mitsui Banking, with $960 billion, is not far behind, while Mitsubishi Tokyo Financial Group ranks third with $835 billion, and even UFJ Group, with $820 billion, can look the likes of Deutsche Bank in the eye.

Assets are one thing; quality of assets and the ability to make them work is something else, and this is where questions are being raised.

Like every bank in Japan the Big Four is saddled with massive bad debts which the government is desperately trying to find acceptable ways of tackling.

The Bank of Japan has already raised concern about the concentration of some of the worst areas of corporate delinquency into the hands of the new banks.

The four will have almost 50% of the bad loans to the construction, real estate and non-banking financial sectors. None of these bombedout sectors is showing any signs of improving as Japan's economy struggles at near-zero growth.

Adding to the festering loans has been the impact of this year's slide in Japanese stock prices, which has eaten deep into the asset base of the whole Japanese banking system. …

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