Asahi Bank forecasts full-year net loss of 530 bil. yen.

TOKYO, Nov. 20 Kyodo

(EDS: ADDING PLAN TO ISSUE 100 BIL. YEN SECURITIES, OTHER INFO)

Bad loan-swamped Asahi Bank on Tuesday revised its group net income forecast for the whole of fiscal 2001 sharply downward to a loss of 530 billion yen, a reversal from its May forecast of a 36 billion yen profit.

The 530 billion yen loss is the largest among group net losses for the year ending March 31, 2002 expected by major Japanese banks, which are accelerating disposal of nonperforming loans under pressure from the government.

The bank attributed the revision to a decision to bolster the tally of loan-loss charges for the year to 400 billion yen. This is an increase of 300 billion yen from the initially planned credit cost of 100 billion yen.

The bank decided to boost the loan-loss charges because the Financial Services Agency (FSA) began a special check of major banks' books to have banks set aside greater loan-loss provisions for outstanding loans to firms in serious trouble, bank officials said.

The loan-loss charges will be expanded in connection with loans to construction, real estate and retail firms, the officials said.

In an effort to prevent the expected hefty losses from eroding its capital adequacy ratio, Asahi Bank will issue special securities totaling 100 billion yen through a special purpose company to be set up as one of its subsidiaries, the bank said.

The issuance of the securities, scheduled to be implemented by the March 31 end of this fiscal year, will allow the bank's capital adequacy ratio to remain at the current 9% line despite the huge group net losses, it said.

The major commercial bank also lowered its pretax income forecast to a loss of 660 billion yen in a reversal of its 60 billion yen profit forecast.

Its operating revenues forecast remained the same at 800 billion yen on a group basis.

Earlier this month, Asahi said it and U.S. investment bank Goldman Sachs Group Inc. agreed to set up two companies, one charged with buying Asahi's bad loans at market value and the other acting as a servicer company.

Under accounting rules, sales of loans by a bank to another company enables the bank to remove the loans from the asset column of its balance sheet.

In addition to the credit cost, Asahi said it will accelerate its unloading of shareholdings to clear huge latent losses on those shares. The bank will book an extraordinary loss to clear appraisal losses of 290 billion yen on its shareholdings, it said.

Asahi said it will cut its fixed costs, including personnel costs, by 17.5 billion yen a year, starting in fiscal 2002.

It will also cut 1,291 more jobs over the next six months. As a result, its workforce will shrink to 10,600 people by the end of next March.

The stepped-up bad-loan disposal and downsizing program will increase the bank's parent-only net profit for the whole of fiscal 2002 by 6 billion yen to 42 billion yen.