Sumitomo to sell $5 bn of stocks to repay debts

Jan 6 | Updated: Jan 7 2006, 06:10am hrs
Sumitomo Mitsui Financial Group Inc, Japans third-largest bank by assets, on Friday said it will sell 576 billion yen ($5 billion) of shares this month to repay public funds received in a bailout.

The bank, which has said it will pay 1.1 trillion yen to the government by March 2008, is taking advantage of a six-month, 63% gain in its shares to raise funds. Mizuho Financial Group Inc, Japans second-largest lender, raised 532 billion yen in October in the nations largest share sale since 2001.

The longest economic expansion since 1997 is helping end seven years of deflation and revive the nations stock markets. Repaying the money received in bailouts underscores the revival in Japans banks as they halved bad-loan ratios in the three years ended March 31, clearing 19 trillion yen of dud credits created by the countrys four recessions since 1991.

It is all going according to plan, said Jun Nishizaki, who overseas about $250 million in Japanese at Nissay Asset Management Corp in Tokyo. The economys recovering, bank stocks have risen and they are selling shares to repay the government.

Pay-Up Time

Sumitomo will pay 1.1 trillion yen to the government by March 2008, is taking advantage of a six-month, 63% gain in its shares to raise funds
Mitsubishi UFJ Financial Group received more than 10 trillion yen from the government, since 1998 to strengthen their capital as bad loans mounted

Improved earnings prospects for the banks helped push the index of 84 lenders traded on the Tokyo Stock Exchanges first section 60% higher in the past six months. Sumitomo Mitsui in November raised its profit forecast 20% after cutting bad loans and increasing sales of mutual funds. Net income will climb to a record 550 billion yen for the year ending March 31, it forecast.

Japans biggest banks, including Mitsubishi UFJ Financial Group Inc, received more than 10 trillion yen from the government since 1998 to strengthen their capital as bad loans mounted. Mitsubishi UFJ, the worlds largest bank by assets, repaid 323.6 billion yen in October.

It still owes the government 820.5 billion yen of funds received in a 1999 bailout of the former UFJ Holdings Inc. Mitsubishi Tokyo Financial Group Inc bought UFJ in October to form Mitsubishi UFJ.