■Performance trends of J Trust <8508>

Segment trends by business:

(1) Japanese Financial Business

The balance of debt guarantees increased to 245.1 billion yen by the end of September 2024. Among the guarantees, rental housing loans (apartment loans), which account for 80% of the guarantee balance, continued to show steady growth since the start of the used apartment loan guarantee in November 2020. The total guarantee balance is planned to reach 250 billion yen by the end of December 2024. The company group is undertaking various efforts aimed at significantly expanding the guarantee balance. In addition to traditional apartment loan guarantees, they are diversifying guarantee products such as securities collateral loans, overseas real estate collateral loans, crowdfunding (loan-type / real estate investment-type) guarantees, and real estate purchase guarantees, with results gradually becoming evident.

In the servicer (debt collection) business, Partir Debt Collection Co., Ltd. is experiencing smooth collection, and the purchase of receivables is progressing, with the balance of claimed receivables increasing to 1023.8 billion yen by the end of September 2024. In the receivables collection sector, the company boasts one of Japan's top collection capabilities, leveraging the expertise of professionals from various receivables collection companies, serving as a pillar of profit alongside guarantee operations in the Japanese financial business. Due to the robust installment business, Nexus Card reported operating revenue of 1.6 billion yen (an increase of 0.7 billion yen year-on-year) and operating profit of 0.6 billion yen (an increase of 0.6 billion yen year-on-year), exceeding the break-even point. J Trust Global Securities Co., Ltd. is also performing well in private banking and IFA (Independent Financial Advisor) businesses, showing operating revenue of 3.3 billion yen (an increase of 0.7 billion yen year-on-year) and operating profit of 0.3 billion yen (an increase of 0.5 billion yen year-on-year), achieving profitability. Managed assets are projected to expand to 386.6 billion yen by the end of September 2024 and 430 billion yen by the end of December 2024, with plans for fee increases.

(2) Korean and Mongolian Financial Business

For the third quarter of the fiscal year ending December 2024, operating revenue was 34,554 million yen (a decrease of 3.1% year-on-year), and operating loss was 72 million yen (compared to a loss of 1,652 million yen in the same period last year). Operating revenue decreased due to a reduction in loans in the savings bank business. While the increase in debt sale losses due to the worsening economy and deterioration of receivables led to operating losses, the decrease in interest expenses due to reduced deposits helped narrow the loss. Provisions had accumulated by the second quarter, but controlling non-performing loans resulted in performance improvements as planned.

The loan balance of JT Shin-ai Savings Bank Co., Ltd. decreased to 227.8 billion yen by the end of September 2024 due to strategic restraint on personal lending in response to increasing non-performing loans and compliance with BIS regulations. As the loan balance decreased, the non-performing loan ratio rose to 9.46% as of the end of September 2024, but the net rate after deducting provisions remained low at 2.61%. The loan balance of JT Savings Bank remained almost unchanged at 206.3 billion yen by the end of September 2024. This is a result of prioritizing the improvement of asset quality and controlling loan balances. Although the non-performing loan ratio reached 9.47% by the end of September 2024, the net rate after deducting provisions remained at 7.64%. Compared to JT Shin-ai Savings Bank, the net non-performing loan ratio is higher, but the proportion of corporate loans at JT Savings Bank is large, with most secured by collateral, so there is no problem. The ongoing strategy focuses on strengthening recovery and monitoring to keep non-performing loans under control.

(3) Southeast Asia Financial Business

For the third quarter of the fiscal year ending December 2024, operating revenue was 35,580 million yen (a 29.3% increase compared to the same period last year), and operating profit was 2,310 million yen (a 56.6% increase). Operating revenue increased due to a rise in loans in the banking sector, an increase in new lending rates, and the reversal of bad debt provisions. Operating profit grew due to increased interest income from the accumulation of good loans.

a) J Trust Bank Indonesia

For the third quarter of the fiscal year ending December 2024, operating revenue at J Trust Bank Indonesia was 22.2 billion yen (an increase of 5.4 billion yen compared to the same period last year), and operating profit was 2 billion yen (an increase of 1 billion yen). The loan balance, primarily for large corporations and state-owned enterprises, increased steadily to 267.3 billion yen by the end of September 2024. Along with efforts to suppress bad debts and recoveries, the loan balance increased, resulting in a bad debt ratio that remained low at 1.20%, below the Indonesia banking industry's average of 2.3% (as of August 2024). After deducting bad debt provisions, the net ratio was 0.91%. This reflects the results of strengthened risk management. The deposit balance also increased to 324.7 billion yen (as of the end of September 2024). Although the deposit interest rate rose slightly to 5.89%, it remained lower than Indonesia's policy interest rate (the central bank's lending rate to commercial banks was 6.00% as of September 2024), contributing to the good performance of J Trust Bank Indonesia.

b) J Trust Royal Bank

At J Trust Royal Bank Plc. in Cambodia, for the third quarter of the fiscal year ending December 2024, operating revenue was 11.9 billion yen (an increase of 1.9 billion yen compared to the same period last year), and operating profit was 1.6 billion yen (an increase of 0.6 billion yen). Due to an increase in loan rates and the impact of Yen depreciation, both revenue and profit saw growth. The loan balance continues to be strategically controlled to improve quality, decreasing to 136.3 billion yen by the end of September 2024. A primary cause of this is the influence of changes in the Chinese economy on the Cambodian economy, with a bad debt ratio of 7.76%, and a net ratio after deducting bad debt provisions of 1.92%. The policy will continue to strengthen collections and monitoring through property auctions and legal procedures to suppress the bad debt ratio. Meanwhile, the deposit balance as of the end of September 2024 was 140.2 billion yen, with a deposit interest rate of 3.90%. The deposit balance is being controlled with consideration of its balance with loans.

(4) Real Estate Business

In the real estate business, J Grand Co., Ltd., Globles <193A>, and Live Rent Co., Ltd. operate primarily in the domestic market, while Prospect Asset Management, Inc. operates in Hawaii, USA. Live Rent is a rental management company with a small profit contribution, while J Grand and Globles generate most of the profits. For the third quarter of the fiscal year ending December 2024, operating revenue increased to 14,686 million yen (a 34.6% increase compared to the same period last year) due to an increase in the number of real estate transactions at J Grand and the acquisition of the subsidiary Live Rent. However, operating profit decreased to 651 million yen (a 94.0% decrease compared to the same period last year) due to the decline of negative goodwill arising from the absorption merger of Mirai Innovate recorded in the same period last year.

(5) 投資事業

投資事業については、主にJTRUST ASIA PTE. LTD.（Jトラストアジア）が投資事業及び投資先の経営支援を行っている。2024年12月期第3四半期の営業収益は5 million円（前年同期比95.7%減）となり、またGroup Lease PCLにかかる訴訟費用（弁護士費用）が増加した一方、訴訟の判決により同社からの回収金を計上したことで1221 million円の営業損失（前年同期は1583 million円の損失）となった。2023年4月には、シンガポール高等法院において被告のGroup Lease PCLらに対して約124 million米ドル（約18173 million円、1米ドル=146円換算）と、これに対する2021年8月からの利息の支払い等を命じる判決が下り、2024年1月に判決が確定し、2024年5月には約855 million円を回収した。同社では裁判で争った金銭債権に対して既に全額貸倒引当金を設定しており将来の回収金は利益計上される。今後も回収に注力することでグループ業績に貢献する計画である。

(Written by FISCO guest analyst Nozomi Kokushige).