Mitsubishi UFJ May Raise Capital, Nikkei Says

By Stanley White

Oct. 26 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc., the Japanese bank investing $9 billion in Morgan Stanley, may raise as much as 1 trillion yen ($10 billion) in additional capital, the Nikkei newspaper said.

Japan's biggest lender may sell shares before March 31, to improve its finances due to unrealized losses on stockholdings, the newspaper reported, without saying where it obtained the information.

Takashi Takeuchi, a spokesman at Tokyo-based Mitsubishi UFJ, declined to comment on the report.

Shares of Japan's six biggest banks including Mizuho Financial Group Inc. fell in Tokyo last week on concern profits may decline as the global credit crisis pushes the world's second-biggest economy toward a recession. Bankruptcy debt in the nation almost tripled in the six months ended Sept.30, according to research company Teikoku Databank Ltd.

The benchmark Nikkei 225 Stock Average has fallen 32 percent this month, eroding the value of shares the banks hold as part of their capital. Stocks in the index are trading at an average of about 90 percent of their book value, compared with 1.3 times for the 1,730 member shares making up the MSCI World Index.

Finance Minister Shoichi Nakagawa said on Oct. 17 that Japan should change mark-to-market accounting regulations if current rules are found to cause ``systemic risk.''

Masamoto Yashiro, chairman of Shinsei Bank Ltd., three days later urged immediate suspension of mark-to-market accounting for about two years, as an emergency measure to deal with the global financial crisis that's forcing companies to book losses on illiquid holdings.

Mizuho, Sumitomo Mitsui

Mizuho, Japan's second-largest bank by revenue, and Sumitomo Mitsui Financial Group Inc., the third-biggest, may also raise several hundreds of billion yen in additional capital to offset losses on their shareholdings, public broadcaster NHK reported, without citing its sources.

Telephone calls to Mizuho and Sumitomo Mitsui seeking comment on the press reports went unanswered today.

JPMorgan analyst Katsuhito Sasajima cut his rating on Mizuho to ``underweight'' from ``neutral'' and slashed his price target on the stock to 280,000 yen from 500,000 yen in an Oct. 22 report, citing rising credit costs and a weak performance by the bank's securities unit.

Lending growth at Japanese banks slowed in September for the first time in nine months as companies needed to borrow less for raw materials because prices dropped, according to the Bank of Japan. Excluding credit associations, loans rose 1.8 percent from a year earlier after 2 percent growth in August, the bank said.

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net