OREANDA-NEWS. Aozora Bank, Ltd. announced its financial results for FY2013, its earnings forecast for FY2014, as well as the Bank's FY2013 fourth quarter dividend payment and FY2014 dividend forecast.

Earnings results for FY2013 Aozora reported consolidated net income of 42.3 billion yen, an increase of 4.4% year on year. This result also exceeded the full-year forecast of 41.0 billion yen.

Shinsuke Baba, Representative Director, President and Chief Executive Officer of Aozora Bank commented, "Our net income of 42.3 billion yen exceeded the full-year forecast and represented a strong start for the first year of Aozora's new phase. While aggregate loan demand increased moderately during the period, pricing competition has been increasingly intense in the domestic market. Despite the challenges of a difficult operating environment, we achieved positive results due to the Bank's sharp focus on balancing risk and return, as well as solid performance from our business groups, including the continued strong sales of financial products to our mass affluent retail, corporate and financial institution customers. As a result of our performance this past year, today we announced a total dividend per common share for FY2013 of 14.5 yen. This amount exceeds the original forecast of 14.0 yen. The fourth quarter dividend will be 4.5 yen."

Baba concluded, "We remain committed to enhancing our corporate value through a focus on refining and implementing our business model which is designed to achieve sustainable earnings. I would like to express my gratitude to all of our stakeholders for their continuing support."

Net income was 42.3 billion yen, an increase of 1.8 billion yen, or 4.4% year on year, exceeding the full-year forecast. This result included growth in earnings primarily from the sale of financial products to our mass affluent retail customers, the sale of derivative-related products to our corporate and financial institution customers, as well as favorable gains from investments in limited partnerships.

Net revenue was 80.6 billion yen, a year on year decrease of 3.9 billion yen, or 4.6%. This decline was mainly the result of risk reduction measures taken by the Bank in the first six months of FY2013. While not included in net revenue, the Bank recorded 5.2 billion yen in gains on the sale of domestic equity ETFs, which brought total business-related revenue to 85.8 billion yen.

The Bank's net interest margin increased 2 bps to 1.09%. Contributing to this result was a reduction in funding costs of 9 bps, while the Bank managed a decline of only 7 bps in the yield on total investments.

General and administrative expenses were 39.3 billion yen, a year on year increase of 0.6 billion yen, or 1.6%. While expenses increased related to the Bank's business development, including its retail business, the OHR based on business-related revenue, including gains on the sale of domestic equity ETFs, remained low at 45.8% which reflected the ongoing priority assigned to efficient operations.

Credit-related expenses were a net expense of 2.3 billion yen, compared with a net expense of 2.4 billion yen in FY2012. This result included recoveries of claims written-off in previous fiscal years, as well as the Bank's conservative allocation of reserves. The ratio of credit-related expenses to total loans remained low at 0.09%.

Loans at year-end were 2,643.5 billion yen, a decrease of 76.2 billion yen, or 2.8%, from March 31, 2013. This result mainly reflected the reduction of less profitable, short-term loans towards the end of the fiscal year, as well as the Bank's sharp focus on balancing risk and return throughout the year.

The percentage of retail funding to total core funding (the sum of deposits, negotiable certificates of deposit and debentures) was stable at 63.8%. The Bank maintained adequate liquidity reserves of approximately 520 billion yen as of March 31, 2014.

Non-performing claims as defined by the Financial Reconstruction Law (FRL) were 80.2 billion yen, a decrease of 26.1 billion yen, or 24.6%, from March 31, 2013. The FRL ratio improved by 0.85 points to 2.98%. In addition, the percentage of FRL claims covered by reserves, collateral and guarantees remained high at 89.1% as of March 31, 2014. The ratio of loan loss reserves to total loans on a consolidated basis remained high at 2.44%.

The Bank's consolidated capital adequacy ratio (Basel III basis, domestic standard) remained high at 15.13%.