Retail collapse hits Japan's biggest bank

Japan's fourth largest retailer goes bust

The world's largest banking group Mizuho Holdings will post a net loss in the half year to September after Japan's biggest retail collapse since Sogo went under last year.

Mizuho expects its net loss to reach 260bn yen ($2.2bn) as the banking giant takes on huge debts from retailer Mycal, which filed for bankruptcy on Friday.

"We attribute our expected loss mainly to the collapse of Mycal," said spokesman Soichi Hosoi.

Mycal, Japan's fourth-largest supermarket chain operator, filed for court protection from creditors with 1.7 trillion yen ($15bn) in group liabilities.

The failed retailer has now reportedly entered into talks with Wal-Mart over the US retailing giant's financial support for its rehabilitation, news reports in Japan said on Sunday.

Wal-Mart's interest

Mycal is negotiating with both domestic and foreign firms to restore confidence and raise funds.

Earlier Mycal and Wal-Mart talks failed after the US retailer expressed concerns over Mycal's huge debt.

Wal-Mart is reported to be interested again because the filing for court protection is expected to cut the burden of Mycal's interest-bearing debts, the Kyodo News agency said, quoting company sources.

Wal-Mart has some 3,500 locations in the US and more than1,000 in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, South Korea, Germany and Britain but none in Japan.

Mycal operates 233 supermarkets, department and other types of stores in Japan.

Total write-off

Mizuho plans to write-off some 150bn of 314bn yen in loans extended to Mycal, a bank spokesman said.

The bank now expects a group pre-tax loss to reach 370bn yen, reversing Mizuho's earlier forecast of 90bn yen in net profit.

Mizuho was created in September last year by a three-way alliance among Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan and has total assets of 151 trillion yen.

Mizuho also said it would write off one trillion yen in bad loans in the current fiscal year ending March 2002, up from 800bn yen as planned.

"The disposal of bad loans is vital to make our financial foundation sound and strong," the spokesman said.

In August, Mizuho announced it would get rid of 1.2 trillion yen in bad loans by 2003 as part of restructuring efforts.