Nowhere to Run

2008-04-12: Twp of Japan’s largest banks d Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. are being dragged down into the unrelenting maelstrom of subprime disaster. Already Mizuho has revised earnings estimates downward three times because of the subprime problem, the latest estimate of net income is 310 billion yen for the fiscal year that ended March 31, down from 480 billion yen in its January forecast. Meanwhile, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group forecast their subprime loan-related losses will grow to around 100 billion yen, respectively. Their net incomes are projected to be between 400 billion yen to 500 billion yen. Complicating matters is the fact that in the overall economy the banks –like all banks– are boxed in. Even if they could remove the dead weight of remaining subprime related write downs, in the shock wave of the credit pop there is just no where to go.

“The banks have little future growth ahead,” said Patrick Lemmens, who helps oversee about $1 billion at ABN Amro Asset Management in Amsterdam. “These banks may not have such large subprime exposure, but the big problem is they’re in an economy that’s not moving.”

That is not a problem that any bank can do something about.