Management Greeting

I have been asked to assume the role of serving as Aozora Bank’s Representative Director, President and CEO beginning on April 1, 2024. I would first like to extend my appreciation to all of Aozora’s stakeholders for their ongoing interest and support.

In the third quarter of fiscal year 2023, we announced our initiatives to significantly reduce our risk exposure by addressing two balance sheet issues: making additional provisions to our loan loss reserves for U.S. non-recourse office loans and the restructuring of the securities portfolio. We made the decision to directly address these legacy issues and not wait for them to recover over time so that we could focus greater attention on our customer-related business mainly driven by Aozora’s Strategic Investments Business.

As a result of the action that we have taken, profit attributable to owners of parent will be a net loss and our consolidated capital adequacy ratio will move temporarily below our target. We also made the decision to suspend our dividend for the third and fourth quarters of fiscal year 2023. The full-year dividend will be 76 yen per share, revised downward from the initial forecast of 154 yen. We regret that we were not able to meet the expectations of our shareholders.

Aozora’s true strength lies in our skill at providing finance to market segments important for our future society. These include fostering start-up companies, corporate M&As, clean energy and business recovery. Financial support for these areas requires a high level of expertise and experience with insights into the direction of the markets. Financial institutions that have primarily focused on customers’ financial results in their credit screening process tend to overlook these markets. Aozora has long been a market leader in these niche segments by leveraging its experience in long-term financing developed during the early days as a long-term credit bank. Under the Mid-term Plan “Aozora 2025,” I believe that we will be able to play an even more active role in our corporate customers’ three growth phases.

The first phase is “Fostering” companies in their start-up stage. Aozora is among the first to provide loans to start-ups that plan to go public (venture debt). This business was launched three years ago and we are now expecting that some of the start-ups we have invested in will go public beginning this fiscal year.

In the “Change” phase, companies are actively restructuring their business through M&As in response to a rapidly changing society. With an increasing number of business successions by aging owners of SMEs and the privatization of listed companies, we expect the M&A market to continue to grow, which will lead to increased demand for LBO finance.
With regard to financial services required for a “Change” to a decarbonized society, Aozora intends to accelerate initiatives through its network of regional financial institutions as a leading lender in the areas of project finance for renewable energy.

For companies’ “Recovery” phase, our group company Aozora Loan Services has a long-standing proven track record. We will continue to proactively address the recovery financing needs of regional financial institutions and distressed businesses by leveraging our network of regional financial institutions.

Amid a significant change in society, I believe that we are right on track to contribute to society in each phase of “Fostering,” “Change” and “Recovery” through Aozora’s Strategic Investments Business, a highly specialized area where we can leverage our strengths.
GMO Aozora Net Bank (GANB), an internet bank we established jointly with GMO Internet Group, has a distinguishing characteristic of cost competitiveness leveraging its in-house production capabilities, and this allows for offering the lowest possible fees in the industry. GANB’s focus on opening accounts for start-ups has gained support from corporate customers, leading to an increasing number of corporate accounts. GANB also strives to proactively support customers’ DX initiatives by offering API connections, where its banking functions are embedded in corporate customers’ systems, as well as BaaS (Banking as a Service), which responds to a system connection requiring large-scale customization.

Aozora will work to restore the trust of customers and the market by achieving a V-shaped recovery in this fiscal year through the expansion of our customer-related business and growth in GANB as I just mentioned. We will also strengthen our risk management even further and restructure our balance sheet while taking into consideration future trends in the market and interest rates, and strive to achieve stable and sustainable growth at the earliest possible timing.

We ask for your continued understanding and support for the Aozora Group.