Feb. 1 (Bloomberg) -- Mizuho Financial Group Inc. fell 5 percent, leading declines by Japanese banks in Tokyo trading, after disclosing a 275 billion yen ($2.6 billion) loss from subprime-infected holdings and cutting its full-year forecast.

Japan's second-biggest bank by revenue trimmed its profit forecast by 26 percent to 480 billion yen for the year to March, after the market closed yesterday. HSBC Holdings Plc said today Mizuho may suffer a further 330 billion yen in losses on mortgage-backed securities.

``We've cut our forecast for Mizuho for the full year based on our worst case scenario of 330 billion yen more in costs'' related to residential mortgages, HSBC analyst Brett Hemsley said in an interview.

Losses from plummeting values of securities linked to U.S. subprime home loans have hurt Japanese banks already struggling to bolster lending. Mizuho and three of its largest rivals reported a combined $3.9 billion in mortgage-related losses this week, eroding profits.

Mizuho expects a further 50 billion yen of losses at its securities unit stemming from the collapse of the U.S. mortgage market, spokeswoman Masako Shiono said today. UBS AG analyst Shinichi Tamura said that prediction may be too optimistic.

``Wider losses are easily conceivable as the group's holdings of related securities with sharp price declines totals 400 to 500 billion yen plus,'' he wrote in a report dated yesterday.

$146 Billion Losses

Financial companies worldwide have taken about $146 billion of asset writedowns and losses since the beginning of 2007, as fallout from the worst U.S. housing market since the Great Depression rippled through securities markets. Merrill Lynch & Co. has written down $24.5 billion of investments, costing former Chief Executive Officer Stan O'Neal his job.

``I'm very cautious about global banks not just Japan,'' said Yuuki Sakurai, a Tokyo-based investment manager at Fukoku Mutual Life Insurance Co., which manages the equivalent of $41.5 billion in assets. ``The subprime problem obviously isn't over, and we can't be certain it won't affect the U.S. prime market.''

Mizuho had 530 billion yen in overseas residential mortgage- backed securities as of December, 30 billion yen of that backed by subprime credit, the bank said today. Mitsubishi UFJ had 282 billion yen of subprime-related investment at the end of December.

Mizuho fell 25,000 yen to 473,000 yen at the 3 p.m. market close in Tokyo, leading a 2.7 percent decline in the 85-member Topix Banks Index. The bank has lost 45 percent of its market value in the past year.

Negative Outlook

Larger rival Mitsubishi UFJ Financial Group Inc. slipped 3.7 percent. Aozora Bank Ltd., controlled by U.S. buyout fund Cerberus Partners LP, fell 5.6 percent today after reporting a third-quarter loss of 17.9 billion yen yesterday.

HSBC cut its profit forecast for Mizuho for the fiscal year that ends March 31 by 42 percent to 388 billion yen, Hemsley said in a report today. He slashed his target price for the stock to 510,000 yen from 845,000 yen.

Moody's Investors Service today affirmed its negative outlook for Mizuho. Moody's cit its financial strength outlook for Mizuho's banking units from stable in November after the bank said first-half profit fell 17 percent.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

Last Updated: February 1, 2008 04:54 EST