UPDATE 1-Japan bank shares slide on subprime worries

miércoles 16 de enero de 2008 11:38 CET

(Adds details, comments from MUFG)

By David Dolan and Taro Fuse

TOKYO Jan 16 (Reuters) - Shares of Japan's big banks fell sharply on Wednesday as investors feared a widening impact of the U.S. subprime crisis, with Mizuho (8411.T: Cotización) hitting its lowest in more than three years after it agreed to pump $1.2 billion into struggling U.S. rival Merrill Lynch MER.N.

Large Japanese lenders such as Mizuho Financial Group and Mitsubishi UFJ Financial Group Inc (8306.T: Cotización) have so far dodged the heavy losses that have hit the likes of Merrill and Citigroup (C.N: Cotización), but they haven't escaped unscathed.

Top-ranked Mitsubishi UFJ likely lost as much as $470 million on subprime investments last year, a more than tenfold increase from its previous estimate, industry sources with direct knowledge of the matter said on Wednesday. [ID:nT371216]

"Investors are worried this is turning into a black hole," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. "Sentiment is bad because no one knows if there will be further losses."

Shares of Mizuho Financial, Japan's second-largest bank, fell 8.8 percent to 459,000 yen after earlier hitting their lowest since December 2004. MUFG fell 4.7 percent to 952 yen, the lowest since November.

Mizuho agreed earlier this week to buy Merrill Lynch convertible preferred shares as part of the U.S. firm's $6.6 billion fundraising. Spurred by huge mortgage market losses, the world's largest broker has so far announced plans to raise $12.8 billion from outside investors.

Some Tokyo market participants likened Mizuho's purchase of a Merrill stake to further investment in the subprime market.   Continuación...