■J Trust Performance Trends (8508)

2. Trends by business segment

(1) Japan Finance Business

The debt guarantee balance increased to 245.1 billion yen at the end of 2024/9. Among rental mortgage (apartment loan) guarantees, which account for 80% of guarantee balances, guarantee balances for used apartment loans that began in 2020/11 continued to increase steadily. The total guarantee balance is planned to be 250 billion yen at the end of 2024/12. The company group is carrying out various initiatives with the aim of drastically expanding guarantee balances. In addition to conventional apartment loan guarantees, diversification of guarantee products such as loans secured by securities, loans secured by overseas real estate, crowdfunding (loan type/real estate investment type) guarantees, and real estate purchase guarantees is gradually showing results.

In the servicer (debt collection) business, collection was going well at Partir Debt Collection Co., Ltd., and debt purchases progressed, and the balance of claims increased to 1023.8 billion yen at the end of 2024/9. In debt collection, it has top-class domestic collection power that brings together the know-how of people from various debt collection business companies, and it is a pillar of profit in the Japanese financial business along with guarantee services. Nexus Card exceeded the break-even point with operating revenue of 1.6 billion yen (increase of 0.7 billion yen compared to the same period last year) and operating income of 0.6 billion yen (same increase of 0.6 billion yen) due to strong sales in the installment business. Even at J Trust Global Securities Co., Ltd., the private banking and IFA (abbreviation for Independent Financial Advisor meaning independent financial advisor) business were going well, and operating income was in surplus of 3.3 billion yen (0.7 billion yen increase from the same period last year) and operating income of 0.3 billion yen (same 0.5 billion yen increase). Depositary assets were 386.6 billion yen at the end of 2024/9, and will expand to 430 billion yen at the end of 2024/12, and an increase in fees is planned.

(2) Financial business in Korea and Mongolia

Operating revenue for the third quarter of the fiscal year ending 2024/12 was 34,54 million yen (down 3.1% from the same period last year), and operating loss was 72 million yen (loss of 1652 million yen in the same period last year). Operating revenue declined due to a decrease in loans etc. in the savings banking business. As for operating losses, debt sale losses increased due to economic deterioration and poor receivables, while interest costs decreased due to a decrease in deposits, and the range of losses was reduced. Provisions had been accumulated up to the 2nd quarter, but by suppressing bad debts, performance improvements were brought about as planned.

The loan balance of JT Chinai Savings Bank Co., Ltd. declined to 227.8 billion yen at the end of 2024/9 due to strategic suppression of loans to individuals due to an increase in bad loans and compliance with BIS regulations. The ratio of non-performing loans rose to 9.46% at the end of 2024/9 due to a decrease in loan balances, but it was low at 2.61% on the net after deducting provisions for debt loss. The loan balance of JT Savings Bank remained almost flat at 206.3 billion yen at the end of 2024/9. This is the result of controlling loan balances with an emphasis on improving the quality of claims. Also, the ratio of non-performing loans was 9.47% at the end of 2024/9, but it remained at 7.64% on the internet after deducting provisions for debt loss. Although the net bad debt ratio is high compared to JT Dear Savings Bank, there is a high ratio of corporate loans at JT Savings Bank, and most of them are protected by collateral, so there is no problem. It is a policy to focus on suppressing bad debts by continuing to strengthen collection and monitoring.

(3) Southeast Asian financial business

Operating revenue for the third quarter of the fiscal year ending 2024/12 was 35580 million yen (up 29.3% from the same period last year), and operating profit was 2310 million yen (up 56.6% from the same period). Operating income increased due to an increase in loans in the banking business, an increase in interest rates on new loans, and the return of provisions for debt loss, etc. Operating profit increased due to an increase in interest income, etc. due to the accumulation of excellent loans.

a) J Trust Bank Indonesia

J Trust Bank Indonesia's operating revenue for the third quarter of the fiscal year ending 2024/12 was 22.2 billion yen (up 5.4 billion yen from the same period last year), and operating profit was 2 billion yen (up 1 billion yen from the same period). Loan balances centered on large corporate enterprises and state-owned enterprises increased steadily to 267.3 billion yen at the end of 2024/9. In addition to the compression of bad loans due to suppression and collection of bad loans, there was also an increase in loan balances, and the ratio of non-performing loans remained low at 1.20%, which is lower than the Indonesian banking industry average of 2.3% (2024/8), and it was 0.91% on the net after deducting provisions for debt loss. It can be said that results of strengthening risk management have been shown. Deposit balances also increased to 324.7 billion yen (end of 2024/9). Deposit interest rates rose slightly to 5.89%, but the fact that they remained lower than Indonesia's policy interest rate (central bank loan interest rate to private banks was 6.00% as of 2024/9) also contributed to the strong performance of J Trust Bank Indonesia.

b) J Trust Royal Bank

J Trust Royal Bank Plc in Cambodia (Hereafter, J Trust Royal Bank), operating revenue for the 3rd quarter of the fiscal year ending 2024/12 was 11.9 billion yen (up 1.9 billion yen from the same period last year), and operating profit was 1.6 billion yen (up 0.6 billion yen from the same period). Sales and profit increased due to the effects of rising loan interest rates and the depreciation of the yen. Loan balances continued to be strategically controlled to improve quality, and it decreased to 136.3 billion yen at the end of 2024/9. Mainly due to the fact that the Cambodian economy was affected by changes in the Chinese economy, the ratio of non-performing loans was 7.76%, and 1.92% on the net after deducting provisions for debt loss. The policy is to continue to strengthen collection and monitoring through auctions of collateral properties and legal procedures, etc., and strive to control the ratio of bad debts. Meanwhile, the deposit balance at the end of 2024/9 was 140.2 billion yen, and the deposit interest rate was 3.90%. Deposit balances are controlled by considering the balance with loans.

(4) Real estate business

Regarding the real estate business, J Grand Co., Ltd., Globels ＜193A＞, and Livelent Co., Ltd. are mainly domestic, and Prospect Asset Management, Inc. is in Hawaii, USA, and each is doing real estate business. LiveRent is a rental management company, and profit contributions are small, and J Grand and Globels earn most of the profits. Operating revenue for the 3rd quarter of the fiscal year ending 2024/12 increased sales by 14686 million yen (up 34.6% from the same period last year) due to an increase in real estate sales revenue due to an increase in the number of real estate transactions at J-Grand and the establishment of LifeBrent as a subsidiary. However, operating income declined to 651 million yen (down 94.0% from the same period) due to a decline in negative goodwill profit of 10113 million yen caused by the absorption merger of Mirai Novate recorded in the same period last year.

(5) Investment business

The investment business is mainly JTRUST ASIA PTE. LTD. (J Trust Asia) provides management support for investment businesses and investee companies. Operating revenue for the 3rd quarter of the fiscal year ending 2024/12 was 5 million yen (down 95.7% from the same period last year), and while litigation costs (attorney fees) relating to Group Lease PCL increased, it was an operating loss of 1221 million yen (loss of 1583 million yen in the same period last year) due to recording recovery money from the company due to lawsuit judgments. In 2023/4, the Singapore High Court handed down a ruling ordering about 124 million US dollars (about 18173 million yen, 1 US dollar = 146 yen conversion) against the defendants Group Lease PCL and others, and interest payments etc. from 2028/8 against this, and the judgment was finalized in 2024/1, and approximately 855 million yen was recovered in 2024/5. The company has already set a full debt loss allowance for monetary claims disputed in court, and future recoveries will be recorded as profit. The plan is to continue contributing to group performance by focusing on collection in the future.

(Written by FISCO Visiting Analyst Shigeki Kuni)