* Mizuho to shore up capital, posts $402 mln Q2 loss
* CBA warns bad debts to hit H1 profits
* St George shareholders OK $9 bln takeover by Westpac
* Bank shares fall Asia-wide, CBA hits near 4-yr low
* S.Korea creates $7.2 bln fund to buy bonds (Updates with Mizuho earnings, S.Korea bond fund plans)
By David Dolan and Mette Fraende
TOKYO/SYDNEY, Nov 13 (Reuters) - Mizuho Financial Group (8411.T), Japan's second-biggest bank, said it plans to raise fresh capital reportedly worth $3.2 billion and Australia's No.2 lender warned it expects a big jump in bad loans as shockwaves from the global financial crisis rattle the region's banks.
Mizuho, which on Thursday posted a $402 million net loss for the second quarter, would be following in the footsteps of larger rival Mitsubishi UFJ Financial Group (8306.T), which said last month it would raise $10.5 billion to offset stock market losses.
Commonwealth Bank of Australia (CBA.AX) warned investors to expect a big jump in bad debts and voiced concerns over the economic outlook for at least the next 18 months. [ID:nSYD363142] Asia-Pacific lenders have largely avoided the heavy losses on subprime mortgages that tore through Wall Street, but a weakening economy and plunging equity markets have taken a toll on the sector.
Mizuho, which lost $6.7 billion on subprime investments last year, said it would issue preferred securities to shore up its capital base but had yet to decide on the amount.
Earlier, the Nikkei newspaper reported Mizuho was considering raising 300 billion yen ($3.2 billion) by issuing the securities to several large Japanese insurance companies such as unlisted Dai-Ichi Mutual Life Insurance and Sompo Japan Insurance 8755.T.
"By boosting their capital, the banks will have more money to lend out. Whether or not they have anyone to lend the money to, that's another story," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
Mizuho kept its recently lowered forecast for full-year net profit of 250 billion yen, down 20 percent from a year earlier and less than half its original 560 billion yen estimate. [ID:nT203195]
Mizuho shares closed down 6.6 percent, underperforming a 4.3 percent fall on the broad TOPIX Index .TOPX and taking year-to-date losses to more than half.
South Korean lenders are also planning to lift their capital ratios -- the proportion of capital to their total asset exposure -- to about 11 percent from a current 7-1/2-year low of 10.79 percent, according to a statement from the country's top financial regulator. [ID:nSEO199728]
Korean banks plan to sell bonds to raise money, and the government will set up a new $7.2 billion state fund to invest in the bond market, the Financial Services Commission said.
Fallout from the crisis has devastated bank earnings around the world and there were scant signs of a quick recovery in profits.
CBA, which recently bought local rival BankWest from stressed UK bank HBOS HBOS.L, said growing bad debt charges would make a major dent in its half-year earnings.
It blamed failed Wall Street investment bank Lehman Brothers LEHMQ.PK and two collapsed local firms for much of the forecast increase in bad debt provisions.
"While there is no evidence of systemic credit issues, the group's exposure to Lehman, Allco Finance Group Ltd (AFG.AX) and ABC Learning Centres Ltd ABS.AX will result in significantly higher first-half provisions," the bank said.
Shares in CBA fell as much as 6.3 percent to their lowest in almost four years.
In Japan, Aozora Bank (8304.T) was likely to become the country's first big bank to forecast an annual net loss, the Nikkei reported.
Aozora, whose top shareholder is Cerberus Capital Management [CBS.UL], slashed its net profit forecast in September to 15 billion yen from 26.2 billion yen for the year ending next March, citing increased credit costs and equity derivatives losses.
Aozora is now likely to forecast a net loss of several tens of billion yen, the newspaper said. [ID:nT201958]
Shares in Aozora fell 2.4 percent and have lost almost two-thirds of their value in the past three months alone.
Shareholders in Australia's St George Bank SGB.AX have fared far better, thanks to a takeover offer launched by bigger rival Westpac Banking Corp (WBC.AX) in May, before the worst of the turmoil engulfed the banking sector. As expected, they approved the all-share deal now worth around $9 billion to create Australia's second-largest bank.
Shares in St George dropped 9.4 percent on Thursday, but have outperformed the broader Australian market this year, falling around 24 percent versus a 42 percent slide in the S&P/ASX 200 . ($1=95.73 Yen) (Additional reporting by Yumiko Nishitani in TOKYO, Kim Yeon-hee in SEOUL; Writing by Lincoln Feast, Editing by Ian Geoghegan)