Bad debt gain for Japan megabank

Japanese banks have struggled with bad debts

Japan's biggest bank says shrinking bad debts will boost its full-year profits - but half-year profits slid 8.4% to 234bn yen ($2.3bn; £1.2bn)

Profits in 2003 had been boosted by a one-off tax rebate from Tokyo city.

Mizuho said it had already met the government's target of cutting its bad debts in half.

Japan's entire banking sector has struggled under the weight of loans taken out in the booming 1980s which their borrowers are unable to repay.

The same day, smaller rival Sumitomo Mitsui revealed sharply lower first half profits, down 60% on the year before.

But it, too, said it was getting to grips with its bad debts, explaining that the results were caused by shifting more money into covering loan losses.

Burden

Despite falling short of the 2003 performance, Mizuho's results for the first half of the Japanese financial year were better than the 140bn yen the bank had first forecast.

The dwindling list of delinquent borrowers means bad debts now amount to little more than 3% of the company's overall loan book.

That enabled Mizuho to shift a sizeable slice of the reserves, that had been set aside to restructure the bad loan portfolio, back onto its bottom line.

The bank has more than $1 trillion in assets, and turned over 1.5 trillion yen in the half-year.

It now expects to earn a net profit of 440bn yen for the full year to March 2005 - a third better than it had previously expected.