Sumitomo Mitsui Financial Group said Wednesday that it would raise at least $2.9 billion in an issue of preferred securities, becoming the latest Japanese bank to bolster its capital base in the financial crisis.
Once thought to be relatively unharmed by the global credit turmoil, Japanese banks are now scrambling to raise cash as an economy in recession and heavy exposure to plunging stocks sap their capital.
The country’s two largest banks, Mitsubishi UFJ Financial Group and Mizuho Financial Group, have announced plans to raise as much as $13 billion between them to shore up their balance sheets.
‘‘It’s pretty clear they are looking less well-capitalized in the current environment,’’ said Jason Rogers, credit analyst at Barclays Capital. ‘‘Just to offset the impact of a declining stock market, some serious capital raising is required.’’ Jean-Claude Trichet, president of the European Central Bank, said the deep financial crisis was the first time since World War II that the finances of the industrial world had been at stake. He said the situation could be solved by joint efforts of central banks and governments, with a key role for the private sector, but declined to be drawn out on how long it would take.
‘‘It will take time, but we have to all be up to our responsibilities in a difficult episode,’’ Trichet told Sky Television.
Sumitomo Mitsui, Japan’s thirdlargest bank, said it would issue nonconvertible preferred securities, with the aim of redeeming preferred securities due in January worth ¥284 billion, or $2.9 billion. The bank did not rule out the possibility it could raise more than the amount of securities to be redeemed.
The Yomiuri Shimbun had reported that Sumitomo Mitsui was planning to raise about ¥400 billion.
Shares in Sumitomo Mitsui closed down 7.9 percent at ¥314,000 amid a slide in the banking sector. Mitsubishi UFJ dropped 6.4 percent while Mizuho fell 7.5 percent.
In addition to rising credit costs, Japanese banks have seen their capital depleted by a slide in the stock market because they have a practice of holding big stakes in their clients to cement ties.
‘‘Everyone thought things were relatively good at Japan’s banks, but that wasn’t the case,’’ said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments. ‘‘Stock prices fell and the economy worsened, which pushed credit costs higher.’’ Japan’s regional lenders have been hit particularly hard because of their large securities portfolios and heavy reliance on lending outside the main cities, which tend to be more resilient in an economic slump.
Kenichi Watanabe, chief executive of Nomura Holdings, Japan’s largest brokerage, told reporters Wednesday that he foresaw further consolidation among the regional banks. ‘‘The next issue depends on howthe nations of the world supply financial support,’’ particularly in China, Watanabe said.
The crisis has also brought opportunity for Japanese banks to fill the lending void as their Western rivals regroup.
Yasuhiro Sato, deputy president of Mizuho Corporate Bank, Mizuho’s corporate lending arm, said in an interview that the bank could strengthen cooperation with Bank of America in Asia and that it was enjoying a sharp increase in business with non-Japanese companies.
———— Mike Peacock, Yumiko Nishitani and Nathan Layne contributed reporting.
µ Brown seeks more lending Prime Minister Gordon Brown of Britain said Wednesday that further measures might be needed to encourage banks to resume a normal flow of credit to small businesses and homeowners, The Associated Press reported from London. ‘‘From a period when banks were prepared to take virtually any risk, they are averse to risk, and we have got to turn that around,’’ Brown told the House of Commons.