Nikkei up as big banks surge, consumer lenders gain

TOKYO, May 23 (Reuters) The Nikkei average gained 0.42 percent on Wednesday as shares of Japan's three largest banks extended gains on expected higher profits this year and Toyota Motor Corp and other exporters rose on a softer yen.

Acom Co. and other consumer lenders also rose after official filings showed that some U.S. investment firm increased holdings in these firms.

''Earnings results prompted investors to rethink about bank shares,'' said Tsuyoshi Nomaguchi, strategist at Daiwa Securities Co Ltd's Japanese equity research, who added that both bank and small-cap shares have been a drag on the overall Tokyo market and now are being bought as they look discounted.

''But not everyone is chasing after bank and small-cap shares.

Earnings outlooks for start-up companies remain unclear and earnings at banks are not growing as much as anticipated despite some growth in lending,'' he added.

The Nikkei was up 74.87 points at 17,754.92 as of 0453 GMT, the broader TOPIX index was up 0.75 percent at 1,744.49.

Lenders Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. climbed as investors bet the banks will be able to mount an earnings recovery this year.

Japan's banking sector has lost nearly 20 percent since hitting a seven-year high in April last year, due to concern about a legal crackdown at their affiliated consumer credit companies.

''The market has factored in the negatives, including the (consumer lender) problem, for banks. At the same time, earnings forecasts for this year from Sumitomo Mitsui for this year are showing a profit rise,'' said Soichiro Monji, a strategist at Daiwa SB Investments.

Mitsubishi UFJ, Japan's largest lender, rose 4.4 percent to 1.42 million yen while Mizuho, Japan's second-largest bank, jumped 6.2 percent to 853,000 yen.

Some investors also appeared to have set their eyes on the consumer lender sector. The recent official filings showed that U.S. investment firm Brandes Investment Partners raised its stake in Takefuji Corp. to 8.7 percent from 6.37 percent and its holdings in Acom to 5.01 percent from either nil or below that level.

Credit Saison Co. Ltd. surged 6.4 percent, Takefuji was up 3.3 percent and Acom jumped 11.3 percent.

Meanwhile, exporters gained on a weak yen, which is a boon for companies such as Toyota as it increases profits when revenues from abroad are brought home.

Toyota gained 1.2 percent to 7,330 yen.

REUTERS SBA BD1133