Nov. 9 (Bloomberg) -- Mizuho Financial Group Inc., Japan's second-largest bank, fell to a two-year low in Tokyo after Nikkei newspaper said a proposed takeover of Shinko Securities Co. may be delayed because of losses at Mizuho's investment banking unit.

Mizuho Financial shares plunged 5.7 percent to 531,000 yen, their biggest decline in two months, at the 3 p.m. market close in Tokyo. Shinko Securities Co., slated to become the bank's main brokerage arm, fell 5.5 percent.

Mizuho Securities Co. may have losses totaling more than 100 billion yen ($888 million) on investments in securities linked to subprime U.S. mortgages, Nikkei reported, without saying where it obtained the information. That would be more than triple the 31.1 billion yen valuation loss for the six months to Sept. 30 that Mizuho Securities reported last month.

``A delay won't have any impact because this is consolidation within the financial group and each already operates properly,'' said Toyoki Sameshima, a Tokyo-based analyst at Morgan Stanley.

Mizuho and Shinko denied they are considering a delay.

``We started reviewing the merger ratio. Nothing has been decided about any delay,'' said Masako Shiono, a Tokyo-based spokeswoman at Mizuho Financial. The bank called the 100 billion yen figure ``speculation,'' in a statement on its Web site.

Shinko spokesman Norimitsu Otsubo also said there's been no agreement on a delay. Toshimitsu Okano, a spokesman at Mizuho Securities, didn't return calls made to his office.

Value Lost

Japan's five biggest banks, including Mizuho and larger Mitsubishi UFJ Financial Group Inc., lost an average 27 percent of market value in the past three months as the credit rout that's hurt Citigroup Inc., Merrill Lynch & Co. and UBS AG infected the nation's lenders.

Citigroup this week said losses from subprime-related assets may rise to $11 billion. Shares of the biggest U.S. bank slumped to a four-year low in New York last week after CIBC World Markets and Morgan Stanley recommended investors sell its shares.

Credit-default swaps on bonds of Citigroup, Wachovia Corp. and Morgan Stanley are trading at the highest in at least five years on speculation the biggest U.S. banks may be forced to write down more subprime assets.

``There are no buyers out there for anything related to subprime,'' said Masahiko Nakatani, who help manage $655 million at STB Asset Management Co. in Tokyo. ``It wouldn't surprise me if Japanese financial institutions come out with additional subprime-related losses.''

Seeking Fees

Japan's banks are integrating securities units to compete with Nomura Holdings Inc. and Daiwa Securities Group Inc. for a bigger share of 3 trillion yen in fees brokerages in the world's second-biggest equities market earned in the past fiscal year.

Mitsubishi UFJ announced plans last year to make its brokerage unit wholly owned. Sumitomo Mitsui Financial Group Inc., Japan's third-largest bank, took full ownership last year of unit SMBC Friend Securities Co.

Merging Shinko with Mizuho Securities would create a firm with more than 6,000 employees and 97 offices nationwide, and combined revenue of 600 billon yen, surpassing Citigroup Inc.'s Nikko Cordial Corp. as Japan's third-biggest brokerage. It would have market value of 1.26 trillion yen, based on Shinko's share price when the deal was announced.

Mizuho Financial said on Nov. 5 it was reviewing a takeover plan under which Mizuho Securities stockholders would receive 343 Shinko shares for each of their shares, turning Shinko, 25 percent owned by Mizuho, into the group's main brokerage unit.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Takahiko Hyuga in Tokyo at thyuga@bloomberg.net.

Last Updated: November 9, 2007 03:44 EST