MUFG falls on report of $3.8 bln subprime pain

By David Dolan and Sachi Izumi

TOKYO (Reuters) - Shares in Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz), fell as much as 4.5 percent after a newspaper reported Japan's biggest bank might have suffered up to $3.8 billion in losses from the credit crisis in the year to March.

The writedown, four times the bank's previous estimate, would make MUFG the second-biggest subprime loser in Japan, after rival Mizuho Financial Group's (8411.T: Quote, Profile, Research, Stock Buzz) $5.5 billion in damage that has made it one of of Asia's biggest subprime casualties.

Subprime investments have cost global financial institutions as much as $215 billion as of December, but less than 7 percent of that has come in Asia, according to estimates by Japan's regulatory Financial Services Agency.

The Mainichi newspaper said on Wednesday that MUFG was likely to report next week up to 300 billion yen ($2.9 billion) in writedowns on securitised products, on top of the bank's previous estimated bill of 95 billion yen from investments backed by risky U.S. mortgages.

MUFG spokesman Takashi Takeuchi declined to comment on the report, which analysts said came as no surprise.

"The loss is absolutely within our expectation," said Nana Otsuki, senior analyst at UBS Securities Japan Ltd. "The bank had about 4 trillion yen worth of ABS in December and so even a 5 percent index fall could cause 200 billion yen loss."

Shares of MUFG closed down 2 percent at 1,055 yen, underperforming a 0.2 percent decline in Tokyo's index of bank stocks with the market's benchmark Nikkei Average .N225 up 1.2 percent.

Graeme Knowd, a bank analyst at CLSA Asia-Pacific Markets in Tokyo, told Reuters in an interview last month he was especially cautious about MUFG, which has about 3 trillion yen invested in structured credit products. [nT354735]  Continued...