GMO Financial Holdings to record extraordinary loss due to holding in GMO Aozora Net Bank
In the third quarter of the fiscal year ending December 31, 2022, GMO Financial Holdings, Inc will record an extraordinary loss with regard to its stock holding in GMO Aozora Net Bank, Ltd.
GMO Internet Group, Inc. and Aozora Bank started weighing the possibility of making efforts to jointly operate the net bank that integrates the professional expertise of the two groups in June 2015. GMO Internet Group executed a contract with the shareholders of Aozora in July 2016, based on which we have obtained and possessed GMO Aozora Net Bank shares.
GMO Aozora Net Bank officially launched in July 2018 and has been offering Securities Connect Account, an account integration service with GMO CLICK Securities, Inc., a subsidiary of the Company, since August 2018.
GMO Aozora Net Bank stipulated “No. 1 bank for small and start-up companies,” “No. 1 built-in type finance,” and “No. 1 tech first bank” as three strategies under its mid- to long-term management plan dated 2021. Under these strategies, differences had arisen between the financial results and the business plans aiming to achieve positive figures in the fiscal year ending March 31, 2023, as the growth rate fell below our expectations while the KPIs, such as easy, built-in type financial service contracts and the number of business accounts, increased.
GMO Aozora Net Bank has formulated a new medium-term management plan to further enhance the earnings power by thoroughly strengthening the base business, considering the business progress and financial results for the six months of the fiscal year ending March 31, 2022, and aims to achieve solid financial base through a rights offering.
GMO Financial Holdings has considered in depth the plan and requested a third-party calculation agent to conduct the valuation analysis of the GMO Aozora Net Bank shares. The Company agrees with the plan based on the above two points and has decided to underwrite the capital increase in order to ensure the necessary capital for the implementation and achievement of the plan.
Regarding GMO Financial Holdings’ stock holding in GMO Aozora Net Bank, the actual price has been declining significantly compared to the acquisition cost, and the company has determined that it will not recover from that decline based on the above calculation of the stock price and by taking a comprehensive view of the future operational forecasts and progress on the business plans of the GMO Aozora Net Bank, resulting in valuation loss on investments in securities of JPY 963 million due to recording an impairment loss.
Regarding the difference between the calculated price of the stocks and the purchase price for the class shares of GMO Aozora Net Bank the Company will acquire based on the Shareholders Agreement in the future, it has been decided to record a provision for loss contracts of JPY 3,170 million.