A ¥51.9 billion placement to Daiwa Securities Group (2024)

What independence bought, and what it did not

The order of events — deciding on a ¥51.9 billion capital increase three and a half months after suspending the dividend — tells you the character of this decision. Since the year to March 2016, after repaying the public funds, Aozora had flown a payout ratio of about 50% and gathered individual shareholders with quarterly dividends; it took that sign down and still did not have enough capital. That the counterparty was Daiwa Securities Group owes much to a commercial reason — a client base in which Daiwa acts as lead manager for half of Japan’s roughly 4,000 listed companies — but the closeness of the relationship also helped terms come together quickly: Daiwa had been lead manager of the relisting, and the two presidents had known each other for a decade.

What the alliance filled, however, was capital and a referral channel, not the earnings structure itself. The ¥10 billion of operating profit expected by fiscal 2027 is an estimate built bottom-up from more than two hundred working-level meetings, and remains to be confirmed in actual figures. Meanwhile, at the time of writing, the retail deposits gathered at high rates have run off by ¥376.3 billion in a year, and a deposit yield of 0.43% is above the assumption in the medium-term plan. What a bank that belonged to no group for more than twenty years obtained by giving up its independence was time and optionality — not a guarantee of earning power.