The fiscal 2007 earnings reports for Japan's 12 major banks show they are having little success at boosting their core businesses, according to a Bank of Japan review released Wednesday.
In fiscal 2005, the major banks posted a record ¥3.2 trillion in combined net profit because reserves that had been set aside for nonperforming loans were booked as one-time profit gains.
Two years later, their combined net profit has plunged to ¥1.5 trillion, reflecting the fact that, without the one-time profits, the major banks are struggling to profit from banking.
"Interest income from loan business, the biggest source in its profit on interest category, has been on the decline since the early 2000s," the BOJ's review said. "Investment returns from government bonds and other stocks instead have pushed up that category."
It said the impact the United States subprime loan crisis had on Japanese banks was limited.
The major banks have recently been reinforcing their business with noninterest profits, including commissions from sales of investment funds and insurance policies. But that, too, appears to be a temporary measure.
"That category seems to have reached its peak and begun to decline," the review said.
"It is a key task for the banks to increase profit from their core banking business, which, at the same time, is important for the stability of the nation's financial system," the review said.