Mitsubishi Bank taking a loss of over $1 billion

TOKYO -- In a sign that Japan's 4-year-old banking crisis keeps growing worse, Mitsubishi Bank announced yesterday that it was taking a loss of more than $1 billion because of bad debts at two affiliated finance companies that are undergoing their second bailout in a year.

Mitsubishi Bank, the sixth-largest bank in the world as well as in Japan, said it was taking a $1.08 billion direct loss on bad real estate loans that the affiliates were selling for less than half their face value.

In effect, the bank purchased the loans from the two companies at face value, then sold them at a loss. But if the underlying value of the land held as collateral for the loans falls further, the losses to the bank will grow even larger.

In addition, Mitsubishi Bank said the two companies, Diamond Mortgage and Diamond Factors Ltd., would pay it no interest on their debts from April through the end of September.