On the 2nd, the stock price of Ozora Bank continued to fall sharply on the Tokyo stock market, closing at the lowest price in three years. The company announced on the 1st that it would fall into the red for the first time in 15 years in its consolidated earnings forecast for the current fiscal year (ending March 2024), causing unstoppable selling. While analysts have voiced concerns about the future of business performance and dividends, there is a widespread view that the impact on other banks will be limited.
On the 2nd, Aozora Gin stock temporarily fell 19% from the previous day to 2,080 yen, the lowest price since February 2021. The closing price was 16% lower at 2,150 yen. The day’s trading, which fell into the red, ended at a stop-low (fall by the full price range limit), and American Depositary Receipt (ADR) prices also fell by 26%, the largest decline since 2012, according to Bloomberg data. It became. The company’s market capitalization has decreased by about 30% since the beginning of the year.
Aozora Bank announced on the 1st that its net profit for the current fiscal year is expected to reverse to a deficit of 28 billion yen, as it will record additional reserves for losses on real estate loans for U.S. offices.
Aozora Bank falls into the red as US real estate risk spreads – president apologizes for downward revision
Analyst comments
Yasuro Sakuma, Representative Director of Libra Investments
- After the failure of Silicon Valley Bank (SVB), the market has become immune to this kind of talk, and it has not affected the overall market.
- It is true that U.S. commercial real estate is in dire straits and will continue to smolder as a flashpoint.
- It turns out that Aozora Bank’s current situation is quite different from what the president had said before, and it came as quite a surprise to the market, as it was completely taken off the ladder.
Toyuki Samejima Senior Analyst at SBI Securities
- Many Japanese bank stocks are falling, and the situation where US banks catch a cold and Japanese banks sneeze is probably the same as in the case of SVB.
- Since the three megabanks have exposure to US offices, the decline in stock prices is likely to be influenced by Aozora Bank.
- However, the three megabanks do not take on large risks as they also lend to Japanese companies, and the proportion of loans to US offices in the total is smaller than that of Aozora Bank.
JP Morgan Securities analyst Takahiro Yano and others
- There is little room for a dividend increase in FY2014, and the dividend yield that supported the stock price will continue to decline for some time.
- Issues are US office loans and foreign bonds
- Office loans showed significant improvement with higher reserve ratios, but the restructuring of the securities portfolio is still a work in progress
Bloomberg Intelligence Analyst Puri de Silva
- Japanese megabanks’ exposure to U.S. commercial real estate is manageable and is unlikely to result in large increases in reserves like Aozora Bank.
Mia Nagasaka, Morgan Stanley MUFG Securities Analyst
- Due to the uncertainty of the business environment, there will continue to be a risk that business results will remain unstable.
- Investment decision: “Underweight” and target price of 2,240 yen maintained.
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(Updates stock price information)