Three Japanese megabanks have investments worth 2.053 trillion yen ($26.63 billion) in five debt-ridden European nations--Italy, Spain, Ireland, Portugal and Greece--raising fears of huge losses if the European debt crisis deteriorates, the banks said Nov. 14.
Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. own a combined 315.9 billion yen in government bonds of Italy and Spain as of the end of September. The financial institutions have also provided loans worth 1.738 trillion yen to local companies in the five nations, according to the banks.
Of the three banks, Mitsubishi UFJ has invested the most, at 1.324 trillion yen, followed by Sumitomo Mitsui with 409.7 billion yen and Mizuho with 319.3 billion yen.
The combined investment balance of the three banks in the European nations has fallen 253.7 billion yen, or 13 percent, since the end of June.
All three megabanks will refrain from making further investments or lending to businesses in the region.
"We will not offer new loans (to European companies), given the current debt crisis in Europe," said Katsunori Nagayasu, president and CEO of Mitsubishi UFJ.
The three banks' loans to companies in the five nations account for less than 5 percent of their total overseas lending.
However, Yasuhiro Sato, president and CEO of Mizuho, said the banks cannot rule out the possibility of unexpected damage from the situation in Europe.
"When U.S. Lehman Brothers Holdings Inc. collapsed in 2008, we did not initially expect much of an impact, and Japan turned out to be the one most severely affected by the company's fall," Sato said.
Combined group net profits at the three megabanks rose about 150 billion yen to 1.265 trillion yen, the largest figure since 2005, according to their half-year financial results for fiscal 2011 released on Nov. 14.
Mitsubishi UFJ posted a 95.1-percent jump in net profits from a year ago to 696 billion yen, while Sumitomo Mitsui and Mizuho reported a 24.8-percent decline to 313.7 billion yen and a 25.4-percent drop to 254.6 billion yen, respectively.
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