Daiwa Securities to Take 15 ％ Stake in Aozora Bank

Jiji Press

13:58 JST, May 14, 2024

Tokyo, May 13 (Jiji Press) — Daiwa Securities Group Inc. said Monday it will acquire a stake of over 15 % in Aozora Bank for ¥51.9 billion under a capital and business tie-up agreement.

The securities group will purchase new Aozora Bank shares to be issued under a third-party allotment scheme to make it an equity-method affiliate. It will send an outside director to the bank.

The move comes as the bank’s earnings have been sluggish due in part to a deterioration in the U.S. real estate market. The bank aims to rebuild its management with funds from Daiwa Securities and strengthen its mergers and acquisitions and real estate operations by utilizing Daiwa Securities’ know-how and customer networks.

“As demand for venture financing is increasing day by day, we will increase our capital to direct resources to this area,” Aozora Bank President Hideto Omi told a press conference on the day.

On the same day, the bank reported a net loss of ¥49,904 million for the fiscal year that ended in March, falling into the red for the first time in 15 years.

The dismal result reflected an increase in reserves for potential losses on U.S. commercial real estate loans, as well as losses on foreign securities due to a rise in U.S. interest rates.

For the year through next March, the bank projected a net profit of ¥18 billion , which does not reflect the effects of the tie-up with Daiwa Securities.

At the end of March this year, the bank’s largest shareholder was a fund linked to Japanese activist investor Yoshiaki Murakami, with a stake of about 9 %. After Daiwa Securities takes a 15 % stake, the fund’s stake is expected to fall below 8 %.

Daiwa Securities hopes to expand its wealth management business through the tie-up, by capitalizing on Aozora Bank’s customer base.