TOKYO: Shares in Japan’s Aozora Bank dropped for a second straight day on Friday — wiping hundreds of millions of dollars off its market value — after the lender forecast a full-year net loss due to bad property loans in the US.
Prices in the United States commercial real estate market have dropped sharply on the back of rising borrowing costs and lower demand as more people work from home following the Covid-19 pandemic, prompting concerns about many banks’ exposure.
At the close in Tokyo, Aozora was down 15.91% at 2,150.0 yen, having dived 27.4% the previous day — slashing 870 million dollars off its market capitalization.
The firm reported a net loss of 14.7 billion yen (100 million dollars) for the 9 months to December, and revised its full-year forecast to a twenty-eight billion yen net loss, against its previous forecast of a twenty-four billion yen net profit.
The bank said that due to higher US interest rates and a shift to remote work accelerated by pandemic, the US office market continues to face tough conditions combined with extremely low liquidity.
Aozora Bank highest-profile casualty
Known then as Nippon Credit Bank, Aozora was one of the highest-profile casualties when the property-fueled economic bubble in Japan imploded in the early 1990s and had to be put under government ownership.
Other banks have also been caught up in the current commercial property slump, with New York Community Bancorp setting aside 522 million dollars for loan losses, more than ten times what analysts had estimated.
Banks and fund managers in South Korea are also exposed to a series of bad loans tied to commercial real estate in the US and Europe.
Germany’s Deutsche Bank reported that it quadrupled provisions for losses in the sector during the 4th quarter from a year earlier.
