Aozora Bank : FY2022 Interim Financial Results Overview

FY2022 Interim

Financial Results Overview

November 11, 2022

Copyright © 2022 Aozora Bank, Ltd.

Interim Financial Highlights

Net revenue

Business profit

Profit attributable to owners of parent

43.3 billion yen

(9.1 billion yen decrease year-on-year, progress rate: 42%)

15.0 billion yen

(10.6 billion yen decrease year-on-year, progress rate: 33%)

15.3 billion yen

(4.0 billion yen decrease year-on-year, progress rate: 43%)

Key points

• Net revenue and business profit for 2Q (July-September) both increased compared to 1Q (April-June)
• For the interim period (April-September), net revenue decreased by 9.1 billion yen and profit attributable to owners of parent decreased by 4.0 billion yen compared to the previous year
• Customer-relatedbusiness was strong and net revenue, excluding financial market-related business, increased by 1.1 billion yen compared to the previous year
• Net revenue from financial market-related business declined by 10.2 billion yen compared to the previous year as the Bank maintained its focus on risk management
• Credit-relatedexpenses were a net expense of 1.1 billion yen in 2Q and a net reversal of 2.0 billion yen for the interim period, in line with the original forecast

Dividend for 2Q: 38 yen per common share

• The full-year earnings forecast remains unchanged. The second quarter dividend is 38 yen, approximately 25% of the full-year dividend forecast of 154 yen

(Note) Unless otherwise stated, all amounts stated have been rounded down to the nearest unit.

In addition, "1Q" refers to the period from April to June, "2Q" refers to the period from July to September, "3Q" refers to the period from October to December, "4Q" refers to the period from January to March, and "interim period" refers to the period from April to September.

Copyright © 2022 Aozora Bank, Ltd.

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PL summary

• Net interest income increased by 2.5 billion yen compared to the previous year mainly due to higher loan outstandings as well as the impact of a weaker yen
• While customer-related business was strong, non-interest income decreased by 11.6 billion yen compared to the previous year mainly due to a lower level of earnings from market-related business and the sale of structured bonds
• G&A expenses increased by 1.1 billion yen compared to the previous year, mainly due to increased personnel costs
• Credit-relatedexpenses were a net expense of 1.1 billion yen for 2Q as a result of additional provisions made to general loan loss reserves, mainly due to higher overseas loan outstandings as well as a weaker yen. Credit-related expenses for the interim period were a net reversal of 2.0 billion yen

			FY2021		FY2022		Change B - A
			Interim	Apr. - Jun.	Jul. - Sep.	Interim	Amount	%
		(billion yen)	A	B
		Net revenue	52.4	21.4	21.8	43.3	-9.1	-17.4%
		Net interest income	24.6	14.2	12.9	27.2	+2.5
		Non-interest income	27.7	7.2	8.8	16.0	-11.6
		General & administrative expenses	-27.9	-14.4	-14.6	-29.1	-1.1
		Gains/losses on equity method investments	1.2	0.3	0.4	0.8	-0.3
		Business profit	25.7	7.3	7.6	15.0	-10.6	-41.4%
		Credit-related expenses	0.4	3.2	-1.1	2.0	+1.6
		Gains/losses on stock transactions	0.0	-0.0	4.6	4.5	+4.5
		Ordinary profit	26.4	11.3	9.0	20.4	-6.0	-23.0%
		Extraordinary profit/loss	-0.1	-0.0	-0.0	-0.0	+0.1
		Profit before income taxes	26.3	11.3	9.0	20.4	-5.8	-22.4%
		Taxes	-7.6	-3.3	-2.6	-6.0	+1.6
		Gains/losses attributable to non-controlling	0.8	0.4	0.5	0.9	+0.1
		interests
		Profit attributable to owners of parent	19.4	8.3	7.0	15.3	-4.0	-20.8%

Excluding financial market-related business*

Net revenue

38.2

20.2

19.1

39.3

+1.1

+2.9%

FY2022 Progress forecast

103.0 42%

46.0 33%

49.5 41%

• -

36.0 43%

* Management accounting basis

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Net interest income

• Net interest income was 27.2 billion yen, an increase of 2.5 billion yen compared to the previous year
• • Net interest income for the interim period increased compared to the previous year due to higher loan outstandings, the impact of a weaker yen, and gains on the cancellation of investment trusts
  • Net interest income in 2Q declined compared to 1Q, mainly due to increased foreign currency funding costs as a result of higher overseas interest rates
• The net interest margin for the interim period remained at almost the same level compared to the previous year
• • The net interest margin contracted in 2Q compared to 1Q, mainly due to a lower yield on securities resulting from a lower level of gains on the cancellation of investment trusts

	FY2021		FY2022		Change
	Interim			Interim
	Apr. - Jun.	Jul. - Sep.	B - A
(billion yen)	A	B
Net interest income	24.6	14.2	12.9	27.2	+2.5
Interest income	31.8	21.2	26.1	47.4	+15.6
Interest on loans and	21.7	14.4	19.8	34.2	+12.5
discounts
Interest and dividends	9.5	6.4	5.7	12.2	+2.7
on securities
Incl. gains on cancellation of	0.1	0.9	0.1	1.0	+0.9
investment trusts
Other interest income	0.5	0.3	0.5	0.8	+0.2
Interest expenses	-7.1	-7.0	-13.1	-20.1	-13.0
Interest on deposits and	-2.8	-2.1	-2.7	-4.8	-2.0
NCDs
Interest on debentures	-1.1	-0.4	-0.4	-0.9	+0.2
Interest on borrowings and	-0.6	-0.2	-0.3	-0.6	-0.0
rediscounts
Other interest	-0.3	-0.8	-2.1	-3.0	-2.6
(repurchase interest, etc.)
Interest on swaps	-2.0	-3.2	-7.4	-10.7	-8.6
(Note) Decreases in expenses are shown as positive.

		FY2021		FY2022		Change
		Interim			Interim
		Apr. - Jun.	Jul. - Sep.	B - A
		A	B
	Yield on total investments (A)	1.26%	1.48%	1.78%	1.63%	+0.37%
	Yield on loans (B)	1.42%	1.68%	2.10%	1.90%	+0.48%
	Yield on securities	1.42%	1.81%	1.63%	1.72%	+0.30%
	Yield on funding (C)	0.27%	0.46%	0.83%	0.65%	+0.38%
	Net interest margin (A)-(C)	0.99%	1.02%	0.95%	0.98%	-0.01%
	Lending margin (B)-(C)	1.15%	1.22%	1.27%	1.25%	+0.10%

Net interest margin and lending margin

2%
1%					1.22%	1.27%
1.16%	1.15%	1.17%	1.17%
1%
1%	0.98%	1.01%	1.08%	0.98%	1.02%
	0.95%
1%
		FY2021		FY2022
	1Q	2Q	3Q	4Q	1Q	2Q

Lending margin

Net interest margin

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Non-interest income

• Non-interestincome was 16.0 billion yen, a decrease of 11.6 billion yen year-on-year
• • Non-interestincome, excluding financial market-related business, was 17.7 billion yen, representing steady progress
  • Net trading revenues decreased by 6.1 billion yen compared to the previous year, mainly due to a decrease in earnings from the sale of structured bonds and trading profit
  • No significant gains/losses on bond transactions were recorded in 2Q. The Bank performed risk reduction operations on its securities portfolio and saw increased gains on financial derivatives related to hedging included in net other ordinary income

		FY2021		FY2022			Change
		Interim			Interim
		Apr.- Jun.	Jul.- Sep.		B - A
	(billion yen)	A	B
	Non-interest income	27.7	7.2	8.8	16.0	-11.6
	Net fees and commissions	6.7	2.8	2.8	5.7	-1.0
	Net trading revenues	8.0	1.6	0.2	1.8	-6.1
	Gains/losses on	5.4	-2.3	-0.0	-2.3	-7.8
	bond transactions
	Net other ordinary income
	excl. gains/losses on bond	7.4	5.1	5.7	10.8	+3.3
	transactions
	Incl. gains from	5.3	3.1	0.9	4.0	-1.2
	limited partnerships
	(Ref.) Ratio of gains/losses on
	bond transactions to net	10%	-	-	-
	revenue

Non-interest income*

(billion yen)

	25.4		27.7
27.5
	8.1	19.5	7.8	16.0
17.5
		9.5
7.5	17.3		19.8	17.7
	9.9
-2.5				-1.7
	FY2019	FY2020	FY2021	FY2022
	Interim	Interim	Interim	Interim

Non-interest income from financial market-related business

Non-interest income excl. financial market-related business

* Management accounting basis

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