Japan Stocks Decline After MUFG Results Spark Bad-Loan Concern

By Masaki Kondo

Nov. 19 (Bloomberg) -- Japan stocks declined, led by banks, on mounting concern the nation's drop into recession will lead to an increase in bad-loan costs.

Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, sank 6.4 percent after posting a 61 percent decline in quarterly profit and announcing a share sale to boost capital. Takefuji Corp. tumbled 9.9 percent, leading a slump by consumer lenders, after Nikko Citigroup Ltd. said interest refund claims are rising. Softbank Corp., a mobile carrier that's lost half its value this year, jumped 5.6 percent.

The Nikkei 225 Stock Average fell 55.19, or 0.7 percent, to 8,273.22. The broader Topix index slipped 8.01, or 1 percent, to close at 827.43 in Tokyo, the lowest level since Oct. 28. Twenty one of 33 industry groups on the Topix slumped.

``The economic slowdown is dimming the earnings outlook for banks,'' said Kiyoshi Ishigane, a Tokyo-based senior strategist at Mitsubishi UFJ Asset Management Co., which oversees about $61 billion. ``People are avoiding borrowing money from consumer lenders amid uncertainty in the economy. Borrowing money without a repayment plan is like committing suicide.''

The Topix has fallen 44 percent this year as the collapse of the U.S. mortgage market prompted banks to tighten lending, triggering a series of a series of corporate bankruptcies. About 75 percent of shares on the gauge trade at below their book value, according to Bloomberg data.

Mitsubishi UFJ yesterday posted a 61 percent drop in net income for the three months to Sept. 30, citing mounting losses on stockholdings and rising costs to get rid of bad loans. The bank said it will raise as much as 546 billion yen ($5.65 billion) through a share sale.

Nikkei futures expiring in December dipped 0.7 percent to 8,260 in Osaka and lost 0.3 percent to 8,265 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.