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Thursday, May 10, 2007

Shinsei had 61 billion yen loss in '06

First drop into red caused by Aplus Co. refund account

Staff writer

Shinsei Bank, the first Japanese lender acquired by foreign investors, said Wednesday it posted a net loss of 61 billion yen for the business year that ended March 31 due to losses incurred by Aplus Co., an affiliated consumer lender.

It is the first time the bank, which rose from the ashes of the failed Long-Term Credit Bank of Japan, has gone into the red since it was established in 2000. It is also a huge reversal for the bank, which posted a record net profit of 76 billion yen the previous year.

Shinsei's pretax profit plunged 67.6 percent to 23.2 billion yen despite a 5.9 percent rise in operating revenues to 560 billion yen.

The bank's operating profit fell 14.1 percent to 118.3 billion yen. Operating profit refers to the total profits of core banking operations before loan-loss provisions and taxes are deducted.

"Fiscal 2006 has been a challenging year for Shinsei Bank," President Thierry Porte told a news conference.

But Porte stressed that such provisions are temporary and should allow the bank to return to profitability in the current business year. Porte said he expects the bank will rake in a group net profit of 72 billion yen in business 2007.

Banks' earnings have been dragged down by losses at affiliated consumer lending companies. Excessive interest rates charged by the lenders have forced banks to set aside money to pay refunds for those charges.

Since a Supreme Court judgment in January 2006, lenders have faced increasing demands from borrowers for refunds of excessive interest fees and have been forced to prepare provisions to cover losses from the refunds.

In December, the Diet passed a revised law that lowers the ceiling on consumer loan interest rates from 29.2 percent to 20 percent by late 2009.

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The Japan Times

Article 2 of 9 in Business news

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