Losses soar at Japanese megabank

UFJ is the only megabank still in the red

UFJ, the Japanese bank in the midst of a takeover battle, is to get a $6.4bn injection of cash from its suitor to help it cope with massive bad loans.

UFJ is the smallest of four megabanks, and the only one showing a loss - now expected to be 780bn yen ($7.1bn; £4bn) for the six months to September.

The cash injection will come from its preferred partner, the second-ranked Mitsubishi Tokyo Financial Group.

Sumitomo Mitsui, which holds the number three spot, has counter-bid $31bn.

Mitsubishi Tokyo has yet to put a price tag on its own bid, and some reports suggest that a handful of UFJ boardmembers are having second thoughts.

Loan losses

UFJ has for some time been the weakest of the "big four".

Japan's whole banking sector was hobbled for a decade by the non-performing loans they had handed out as asset prices soared in the 1980s.

Then the bubble burst and share and property values crashed, leaving the banks deep in the red.

After several false starts, most are now dealing with the problem thanks in part to extensive government help and prodding.

But UFJ's loans problems persist.

Having earlier this year estimated loan loss charges of 210bn yen for the first half of the financial year - and a profit of 120bn yen - it now says the charges could reach 865bn yen.

It is now accelerating its efforts, selling a stake in one borrower - Aplus - and arranging a capital infusion for another.

But it has yet to make much progress with one of its biggest problem debtors, retail giant Daiei.