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Friday, Nov. 14, 2008

Capital-hungry Mizuho to issue preferred shares

Staff writer

Mizuho Financial Group Inc. said Thursday it will issue preferred stock to up the group's capital base amid the ongoing global financial turmoil.

A spokesman declined comment on an unconfirmed report it is seeking around ¥300 billion by year's end.

The preferred shares are intended "to increase the group's capital base to secure the agility and improve the flexibility of our future capital strategy," Mizuho said.

Due to losses on investments and rising bad-loan costs, Mizuho last month sharply cut its full-year profit forecast by 55 percent to ¥250 billion from its earlier projection of ¥560 billion.

Meanwhile, the group said Thursday its consolidated net income fell 71.1 percent to ¥94.5 billion in the six months to September, affected by the global financial turmoil.

Mizuho posted an ordinary April-September profit of ¥56.7 billion, also down 85.8 percent. A loss of some ¥72 billion was incurred due to the global market turmoil.

Of the ¥72 billion, Mizuho incurred some ¥59 billion in securities products losses at its group banks and about ¥13 billion at Mizuho Securities Co.

Mizuho Financial is made up of Mizuho Bank, Mizuho Corporate Bank and Mizuho Trust and Banking as well as subsidiaries and affiliates.

At the end of September, the total balance of the Mizuho group's securitization products stood at ¥3.8 trillion.

Mizuho also revised downward its forecast for its group net profit to ¥250 billion for the full year to next March.

On a consolidated basis, Mizuho's capital adequacy ratio was 11.45 percent at the end of September, down 0.25 percent from the end of March.

In fiscal 2007, Mizuho reported net income of ¥311.2 billion. But in a sharp turnaround, Mizuho suffered ¥140 billion in losses on securities in the first half of this fiscal year. Credit-related costs were also expected to be around ¥130 billion at its three banks, mainly due to an increase in domestic corporate bankruptcies and the collapse of Lehman Brothers Holdings Inc.

Mizuho group President Terunobu Maeda gave assurances on the group's capital adequacy ratio amid the turmoil, saying, "We have been able to maintain considerable soundness."

Amid continuing turmoil in financial markets and plunges in global stock prices, Japanese megabanks are taking drastic steps to replenish their capital bases in the face of losses.

To maintain its stock price, Mizuho earlier announced a two-year plan to buy back around ¥800 billion worth of its own shares. It has already spent ¥150 billion on the plan, but will suspend the buyback of the remaining ¥650 billion worth of shares for the foreseeable future, sources said.

Information from Kyodo added

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