The aggregated net profits of the nation's six major banking groups have reached a record 1.73 trillion yen for the April-September half-year period, with four of the groups realizing record profits. A special factor contributed to the soaring profits. Brighter business performances among their borrowers has made it unnecessary to maintain reserves for credit losses to deal with nonperforming loans and enabled the banks to count the reserves as profits. But it must be kept in mind that none of the major banks is paying corporate taxes since they have carried-over losses. Losses can be carried over for up to seven years -- a measure to encourage disposal of nonperforming loans. Companies are exempt from paying corporate taxes if their losses exceed their profits.
These factors have increased the major banks' profits. Sumitomo Trust & Banking Co. will start paying corporate taxes next year because it no longer has carried-over losses. Other banks are expected to take a few more years to start paying.
Since the major banks have realized big profits while not paying corporate taxes, it is logical that consumers expect better services. But these expectations will largely go unmet.
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