November 25, 1995 in Nation/World

Japanese Banks Post Strong Profits

From Staff And Wire Reports

Though racked by troubled loans, Japanese banks on Friday reported hefty profits in the first half of the fiscal year, fueled by lower borrowing costs.

But analysts expect the bubble to burst in coming months and said many banks will go into the red on write-offs of loans that won’t be repaid.

Operating income for the 11 largest commercial banks totaled $18.5 billion, up 71 percent from $10.8 billion last year, according to earnings reports released Friday.

The banks reaped windfall profits in the six-month period ending Sept. 30 thanks largely to drastic interest rate cuts by Japan’s central bank. The cuts allowed banks to borrow money more cheaply and profit from purchasing bonds, which rise in value when interest rates fall.

Big banks like Sanwa and Fuji were particularly strong performers, earning about $2.7 billion each in operating income from their main banking businesses.

“This is as good as it gets,” said banking analyst David Snoddy of Jardine Fleming. “These are probably the best numbers you’ll see this century for the (major) banks.”

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