Mitsubishi UFJ Financial Group Inc. led Japanese banks lower in Tokyo trading after analysts said Citigroup Inc. may be short of capital, triggering concerns about the health of the global financial industry.
Mitsubishi UFJ, Japan's largest publicly traded bank, fell as much as 5.9 percent and the index tracking 85 Japanese banks dropped 4.2 percent, the worst performance among 33 industry groups making up the benchmark Topix.
Japanese bank stock have plunged an average 25 percent this year, as the credit rout that hurt Citigroup, Merrill Lynch & Co. and UBS AG infected the nation's lenders. Citigroup slumped to a four-year low in New York after CIBC World Markets and Morgan Stanley recommended investors sell its shares.
``Citigroup's plunge, prompted by the analyst rating cuts, is bad news for lenders here even though they don't have the same degree of subprime exposure,'' said Soichiro Monji, who helps oversee $47 billion at Daiwa SB Investments Ltd. in Tokyo.
Shinsei Bank Ltd., Nomura Holdings Inc. and Mitsubishi UFJ in the past month have said earnings were eroded by declines in the value of securities linked to U.S. subprime home loans.
Credit Suisse analyst Susan Roth Katzke reduced her rating on Citigroup to the equivalent of hold from buy. Citigroup may have to sell assets, shrinking growth opportunities, because it needs to raise $30 billion of capital, CIBC said.
Citigroup fell 6.9 percent to $38.51 in composite trading on the New York Stock Exchange at 4 p.m. The U.S. bank's shares are scheduled to begin trading on the Tokyo Stock Exchange on Nov. 5.
``Financials were weak in the U.S. so sentiment must be pretty bad,'' said Yoji Takeda, who helps manage about $900 million at RBC Investment (Asia) Ltd. in Hong Kong. ``Japanese banks are less exposed to subprime, but their underlying fundamentals aren't that good in the medium-term.''
Mitsubishi UFJ traded 4.7 percent lower at 1,066 yen as of 9:59 a.m. in Tokyo. Mizuho Financial Group Inc., Japan's second- largest bank, and Sumitomo Mitsui Financial Group Inc. both declined 4.5 percent. ( Bloomberg )