Resona Holdings Inc. (8308), the Japanese bank that was bailed out in 2003 with 1.96 trillion yen ($24 billion), plans to pay back most of the money still owed to taxpayers earlier than scheduled after profit reserves grew.
“We’ve built retained earnings and are not going to sell new shares,” Resona President Seiji Higaki, 60, said in an interview in Tokyo on May 16. The bank will purchase 450 billion yen of the government’s preferred shares earlier than the current target of late 2015, he said.
Taxpayers have injected 3.1 trillion yen into Resona since 1999, when Japan’s banks were saddled with bad loans after an asset bubble burst, and the Tokyo-based lender still owes 872 billion yen. Resona has turned itself around since the 2003 bailout, posting profit in the past eight fiscal years by focusing on lending to retail customers.
“Our core business is retail banking, and what we need the most is to expand the number of household and corporate clients,” said Higaki, who took the post in 2007 to join Chairman Eiji Hosoya in overseeing the bank’s revival.
Resona, Japan’s fifth-biggest bank by market value, is more profitable than larger rivals led by Mitsubishi UFJ Financial Group Inc. (8306) because it targets mortgages and small-business loans that carry higher interest rates, said Shinichiro Nakamura, a Tokyo-based analyst at SMBC Nikko Securities Inc.
“The bank will keep its focus on high-yielding lending such as mortgages and loans for smaller enterprises rather than large companies,” Nakamura said.
Net interest margin at Resona stood at 1.22 percent in March, compared with 1.04 percent for Mitsubishi UFJ, the country’s biggest bank, and 0.78 percent for Mizuho Financial Group Inc. (8411), according to data compiled by Bloomberg.
Resona’s net income climbed 59 percent to 253.7 billion yen in the year ended March as provisions for soured loans fell, according to statements released last week. The bank forecast profit will drop 45 percent to 140 billion yen in the current year in anticipation of credit costs rising as government relief on loan repayments for small businesses expires.
Shares of the lender have declined 9.7 percent this year, underperforming the 84-stock Topix Banks Index (TPNBNK), which advanced 3.4 percent.
Higaki wants to move the debt repayment schedule forward by using retained earnings built up over the past year, he said, without disclosing a new timeline. Resona increased the portion of profit that’s reinvested rather than paid to stockholders by 24 percent last fiscal year to 1.09 trillion yen as of March 31.
“We may split the purchase of the 450 billion yen of preferred stock into several portions, depending on how fast and how much we build reserves in the next four years,” Higaki said.
Resona sold 545 billion yen of new shares in January 2011 as part of Chairman Hosoya’s goal to buy 1.3 trillion yen of preferred shares from the government by 2015. The bank has purchased about 800 billion yen of the stock since the target was unveiled in November 2010.
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