Sept. 28 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc.'s main banking unit cut its half-year profit forecast 44 percent, citing a decline in the value of investments at subsidiaries. Group earnings won't be affected, it said.

Earnings on a non-consolidated basis will probably fall to 100 billion yen ($866 million) for the six months ending Sept. 30, according to a statement to the Tokyo Stock Exchange today. That compares with 146.8 billion yen a year earlier and the bank's previous forecast of 180 billion yen. Tokyo-based Mitsubishi UFJ said the revision was due to a drop in the value of investments in subsidiaries and affiliates ``among other things.''

Mitsubishi UFJ's stake in Acom Co., Japan's biggest consumer finance firm by market value, lost 49 percent of its value in the half year after the government tightened controls on lending and interest charges. Credit card unit Mitsubishi UFJ Nicos Co. last week forecast a net loss of 112 billion yen for the year to March, from an earlier forecast of 15.5 billion yen profit, citing provisions for restructuring and claims for interest refunds.

``The main reason for the revision is a large decline in an investment at an affiliated company,'' said Yusuke Fukui, a spokesman at Mitsubishi UFJ, declining to comment on the affiliates. ``It is not related to U.S. subprime mortgages.''

The revision won't affect consolidated group earnings for the half year, according to the statement.

Subprime Filing

Japan's largest bank also faces some of the same pressures that forced Wall Street's biggest firms to record a combined $3.8 billion in third-quarter losses after marking down the value of their holdings and financing commitments. Surging defaults on subprime mortgages have eroded demand for securities linked to home loans.

Mitsubishi UFJ said last week in a U.S. filing it may have to revalue securities holdings at a ``significantly lower price'' because of credit-market turmoil triggered by subprime mortgage defaults in the U.S. Prices for some securities have declined, while others may not have been ``properly quoted,'' the Tokyo-based bank said on Sept. 21.

Goldman Sachs Group Inc., the world's biggest securities firm, said Sept. 20 it had $1.48 billion of losses for marking to market the value of non-investment grade credits. Lehman Brothers Holdings Inc. and Bear Stearns Cos. each recorded $700 million of losses on markdowns of mortgage securities and leveraged loans, and Morgan Stanley's totaled $877 million. All of the firms are based in New York.

Share Decline

Shares in Mitsubishi UFJ, down 31.3 percent this year, were suspended from trading between Sept. 25 and Sept. 28 because of a stock split, according to the Tokyo Stock Exchange. They closed 3.8 percent lower at 1.01 million yen on Sept. 21.

Shares of Japanese banks fell this year as growth in lending stalled because companies used their own funds for expansion. The index tracking banks traded on the Tokyo exchange has declined 25 percent in 2007, against a 3.8 percent slide by the benchmark Topix. Mitsubishi UFJ was the sixth-worst performer on the 85- member banking index.

Banks failed to pass on higher interest rates to borrowers and faced increased credit costs at consumer finance affiliates. Japan's four largest consumer lenders by assets, led by Aiful Corp., lost a combined $14 billion in the fiscal year ended March.

Costs in Japan's $170 billion consumer finance industry surged after courts lowered maximum interest rates, opened the door for customers to claim interest refunds and as stricter accounting rules required more reserves against such claims.

Mitsubishi UFJ owned 13 percent of Acom as of March, according to data compiled by Bloomberg, a holding worth $460 million at today's market close.

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

Last Updated: September 28, 2007 07:24 EDT