Bad-loan disposal costs at the nation's banks totaled 6.6 trillion yen in fiscal 2002, exceeding banks' core operating profits for the 10th straight year, the Bank of Japan said Monday in a report.

The annual report underlines the chronic nature of banks' bad-loan problem -- losses from past loans grow faster than earnings.

Bad-loan disposal costs in the last fiscal year fell 33.3 percent from 9.9 trillion yen the year before, while banks earned 5.2 trillion yen through core business operations, the BOJ said.

Core earnings have failed to keep pace with problem loans since fiscal 1993, when bad-loan disposal costs hit 5.2 trillion yen and core profits were 4 trillion yen.

A bank's core operations include earnings on loans and stockholdings.

The spotlight has been placed on banks' ability to increase earnings, but most earnings have resulted from a 6.8 percent slash in personnel costs in the reporting year.

However, as a result of banks' aggressive efforts to remove dud loans from their balance sheets, their combined bad-loan balance at the end of fiscal 2002 fell by around 20 percent from the year-before level to 35.3 trillion yen.

Total loan volume fell 15 trillion yen to 420 trillion yen from the previous year.

Stock-related losses at banks increased to 3.9 trillion yen in fiscal 2002 from 2.4 trillion yen a year earlier, as many booked shareholding appraisal losses amid stock market weakness, the BOJ said.

Meanwhile, banks' ratio of capital-to-risk assets fell from 10.1 percent to 9.5 percent.

For major banks, 55 percent of their capital was made up of some 7.8 trillion yen in deferred tax assets.