Profits shrink at Sumitomo Mitsui

Japan's third largest bank, Sumitomo Mitsui, has seen third quarter net profit fall 99% to 154m yen ($1.7m; £1.19m) from 148.9bn yen a year before.

Japan's major banks have been hit hard by rising costs of bad loans and heavy losses on their stock portfolios.

The group also said net profit for the April to December period fell 74% amid the worsening global economic turmoil.

Japan's banks have stakes in their corporate clients, making them sensitive to equity market swings.

"The major problem for Japanese banks is their large equity holdings," said Kristine Li, a bank analyst at KBC Securities in Tokyo.

"If the Nikkei falls from here, the impairment losses in the fourth quarter, which is more important than the third quarter, could be even bigger.

"That could force many banks to revise down their full-year and some banks to raise new capital."

However, the Nikkei index edged 0.56% higher on Wednesday, helped by news of an expansion of a US stimulus plan and adding to the 4.9% jump recorded on Tuesday.

For the full financial year, Sumitomo Mitsui is predicting net profit of 180bn yen on revenue of 3.7 trillion yen.

The results come a day after Japanese broker Nomura reported heavy losses for the final three months of 2008, as it struggles to integrate parts of failed US bank Lehman Brothers.

Nomura made a net loss of 342.9bn yen ($3.8bn; £2.7bn), compared with a profit of 21.8bn yen a year ago.