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Q1Please describe the situation regarding the financial results for the second quarter of the fiscal year ending March 31, 2021.
A1

During the six months ended September 30, 2020, the outlook for the Japanese economy remained unclear against a backdrop of increasing COVID-19 infections nationwide and amidst changes in economic trends stemming from alarm over spreading infections as well as concern about worsening prospects for employment and income, despite a progressing resumption of economic activities halted by the COVID-19 outbreak. Amid this backdrop, the AIFUL Group is addressing the principal management issue of interest repayment claims while making efforts to expand operating assets and diversify the financial business, with an emphasis on balancing safety, profitability and growth.

The AIFUL Group’s consolidated operating revenue for the second quarter of the fiscal year ending March 31, 2021 increase 3.6% compared with the corresponding period of the previous fiscal year, to 63,462 million yen. The principal components were 37,066 million yen in interest on loans (up 5.9% year on year), 9,124 million yen in revenue from the credit card business (up 5.5% year on year) and 7,400 million yen in revenue from the credit guarantee business (down 1.3% year on year). Also, the collection from purchased receivables were 729 million yen (down 18.9% year on year) and the recoveries of written off claims were 3,366 million yen (down 0.9% year on year).

Operating expenses decreased 2,571 million yen to 54,084 million yen (down 4.5% year on year). The main factors included a drop in sales promotion expenses due to a slump in consumption activities arising from the outbreak of COVID-19 and a decrease in provisions to the allowance for doubtful accounts in tandem with a decline in operating assets.

As a result, AIFUL Group posted operating income of 9,378 million yen (up 102.9% year on year) and ordinary income of 10,373 million yen (up 109.6% year on year). Profit attributable to owners of parent stood at 9,812 million yen (up 87.1% year on year), reflecting a loss attributable to non-controlling interests of 178 million yen.

Q2Please describe the situation regarding the consolidated outlook for the fiscal year ending March 31, 2021.
A2

Due to the impact from the spread of COVID-19, it was difficult to make reasonable calculations therefore we were not factoring this impact into our forecasts. We have recalculated our forecasts based on the actual for 2Q and the information available at the time of writing.

In the loan, credit card and credit guarantee businesses, we forecast a recovery trend moving toward the end of the fiscal year, reflecting a recovery in demand for capital owing to the gradual resumption of economic activities after the lift of the state of emergency.

In light of this environment, the AIFUL Group is addressing the principal management issue of interest repayment claims while making efforts to expand operating assets and diversify the financial business, with an emphasis on balancing safety, profitability and growth.

In addition, for AIRA&AIFUL Public Company Limited, we estimate the business environment in Thailand will turn toward recovery moving toward the end of the fiscal year. This reflects the Thai government’s gradual lift of restrictions on economic activities in and after May 2020.

Consequently, we look for operating revenue of 127.8 billion yen (down 11.3 billion yen from the previous forecast ). Meanwhile, we estimate operating expenses of 111.4 billion on expectations of a decrease in provisions to the allowance for doubtful accounts in tandem with a decline in operating assets. Reflecting this, we forecast operating profit of 16.4 billion yen (a drop of 3.5 billion yen from the previous forecast ).

Meanwhile, we project ordinary profit of 17.6 billion yen (a decrease of 2.7 billion yen from the previous forecast ) and profit attributable to owners of parent of 16.5 billion yen (a deterioration of 1.4 billion yen from the previous forecast), attributable to the posting of net loss attributable to non-controlling interests of 100 million yen.

Q3Please give us your view on dividends.
A3

The return of profits to shareholders is a management priority at the AIFUL Group. The Group’s basic policy calls for a consistent return of profits in line with business results. The Group aims to maximize shareholder returns and shareholder value while simultaneously securing stable internal reserves through medium to long-term profit growth.

However, the financial burden associated with claims for interest repayments is still heavy, creating difficult conditions for the distribution of profits. In addition, losses in the distributable amount continue. The Group therefore regret to announce that we will be unable to pay any dividends for the current fiscal year.

The AIFUL Group has been dealing with the principal management issue of interest repayment claims. At the same time, it is taking measures to diversify the financial business and increase operating assets to bolster its revenue base, and also work to diversify funding channels. The Group is also determined to return to the basic policy outlined above by improving its financial position and profitability.

The AIFUL Group asks all of its shareholders for their understanding and cooperation in these endeavors.

AIFUL has adopted the following provisions in its Articles of Incorporation: "The Company may determine dividends of surplus, etc. with a resolution of the Board of Directors pursuant to the provisions of Article 459, Paragraph 1 of the Companies Act" and "the Company may pay interim dividends with a resolution of the Board of Directors with September 30 each year as the record date."

Management Policy/ Environment

Q1Please describe the AIFUL Group’s management policy.
A1

Our aim is to become a global financial group providing products and services that surpass customer expectations, and which is trusted and needed in Japan and around the world.
By practicing management consistent with its Corporate Philosophy and the Essence of the Finance Business, the AIFUL Group strives to become a global financial group that is trusted and needed in Japan and around the world.

We practice management based on our Corporate Philosophy.
The corporate philosophy, conscience guidelines, conduct guidelines and mindset of the AIFUL Group incorporates a direction to be continually pursued.
To achieve the corporate philosophy, we will continue to provide products and services that surpass customer expectations and strive to be a global financial group that is trusted and needed by customers in Japan and overseas.

We practice management based on the essence of the finance business.
The essence of the finance business lies in business risk management.
Risk management in the finance industry means striking a balance between profitability, safety, growth potential and workforce so as to continually adapt to environmental changes, given the permanence of companies. To achieve this, the AIFUL Group pursues financial diversification and actively expands overseas in an effort to establish a global financial group.
For the detailed information, please refer to "Long Term Vision" and “Management Strategy”.

Q2Please describe the current management environment of AIFUL.
A2

For the second quarter of the fiscal year ending March 31, 2021 the Japanese economy remained unpredictable on the back of a slump in consumption activities and the resulting changes in economic trends arising from the outbreak of the novel coronavirus (COVID-19).

Under these circumstances, while dealing with interest repayment claims as the principal management issue, the AIFUL Group has worked to increase operating assets and diversify the financial services business on a group-wide basis, and to manage its business with an emphasis on balancing safety, profitability and growth.

Q3Please describe the market environment for unsecured loans.
A3

The market for unsecured consumer loans shrank from 17 trillion yen in March 2008 to 8.7 trillion yen by March 2013 due to the revision of the Money Lending Business Act that was carried out on the back of an increase in interest repayment claims triggered by the Supreme Court decision in 2006 and the introduction of total loan amount control, impacting a large number of consumer finance companies.

However, the market bottomed out in 2014 and recovered to 10.4 trillion yen by March 2018 due to improved business confidence in the Japanese economy and aggressive advertisements by consumer finance companies on TV and online.

In June 2020, the overall market has shrunk temporarily to 9.9 trillion yen mainly due to the impact of COVID-19. Of this, the operating loan balance stood at 2.6 trillion yen, a decrease of 3.8% versus a year earlier.

Business Performance

Q1Please describe the situation regarding the loan business.
A1

In the loan business, web-related sales promotion expenses were reduced as customers’ funding needs fell due to the slump in consumption activities caused by the COVID-19 outbreak. When economic activities restarted after the state of emergency was lifted, however, ordinary sales and sales promotion efforts were resumed and initiatives were pursued to boost the number of new contracts and the balance of outstanding loans. Among the steps taken to improve customer convenience was an increase in the number of bank ATMs installed in convenience stores that enable customers to make cardless deposits and withdrawals via the “Smartphone ATM Service”.

For the second quarter of the fiscal year ending March 31, 2021 the number of new contracts signed for unsecured loans were 66,000 (down 35.9% year on year) whereas the contract rate was 40.3% (down 2.6 points year on year).

As a result, unsecured loans outstanding at the end of the second quarter of the fiscal year ending March 31, 2021 were 413,696 million yen (down 2.1 % compared with a year earlier), secured loans outstanding were 5,762 million yen (down 17.2 % compared with a year earlier), small business loans outstanding were 7,491 million (down 10.2 % compared with a year earlier) and the total balance of operating loans for the loan segment was 426,950 million yen (down 2.5% compared with a year earlier) .

Q2Please describe the situation regarding the credit card business.
A2

In the credit card business, card use for online shopping was robust in the midst of lifestyle changes arising from efforts to prevent the spread of COVID-19 infections, but card use for retail, food & beverage, and transportation purchases remained sluggish despite the resumption of economic activities after the state of emergency was lifted. Given these circumstances, efforts are being made to increase card applications and purchases by issuing co-branded cards to individuals and corporations.

As a result of the above, the transaction volume for the second quarter of the fiscal year ending March 31, 2021 was 392,709 million yen (down 1.4% year on year), and the balance of accounts receivable installment for credit card business as of the end of second quarter of the fiscal year ending March 31, 2021 stood at 97,440 million yen (down 7.9% compared with a year earlier).

Q3Please provide an overview of credit guarantee business situation.
A3

In the credit guarantee business, there was impact from a decline in capital demand reflecting the drop in economic activities due to the spread of COVID-19, and from voluntary restraint from economic activities by financial institutions. However, accompanying the alleviation of voluntary restraints on business activities following the lift of the state of emergency, we are gradually shifting to a normal business system and undertaking activities, including new product proposals and sales promotion support.

As a result, credit guarantee outstanding at the second quarter of the fiscal year ending March 31, 2021, was 129,625 million yen (up 3.4% from the end of previous fiscal year). Of which, the balance credit guarantees for individuals were 23,224 million yen (up 0.2% from the end of previous fiscal year) and for business operators were 1,161 million yen (down 29.9% from the end of previous fiscal year).

Q4Please describe the situation regarding the overseas business.
A4

The AIFUL Group currently operates group companies in Thailand and Indonesia, where we offer consumer finance and used car loans to local customers.

In the Kingdom of Thailand, a state of emergency was declared in March 2020, restricting economic activities to combat the novel coronavirus. With the number of new infections thereafter remaining low, restrictions have been eased in stages since May and economic activities are recovering. AIRA & AIFUL Public Company Limited, which operates a money lending business in Thailand, saw its business impacted by the temporary closure of stores due to the shutdown of commercial facilities, but it resumed business operations in mid-May. At the request of financial authorities in Thailand, payment deadlines for customers facing financial difficulties due to the coronavirus pandemic have been extended and other relief measures undertaken. To upgrade the loan portfolio in these circumstances, a new scoring system has been introduced to assist in acquiring blue-chip customers.

As a result, for the second quarter of the consolidated fiscal year ending March 31, 2021 AIRA & AIFUL Public Company Limited recorded operating revenue of 3,085 million yen (down 4.7% year on year), operating loss of 91 million yen (compared with operating loss of  513 million yen in the previous period), ordinary loss of 104 million yen (compared with ordinary loss of 484 million yen in the previous period) and net loss of 104 million yen, decreasing 380 million yen (compared with net loss of 484 million yen in the previous period).

Q5Please describe the situation regarding the non-performing loans (NPL).
A5

In the second quarter of the fiscal year ending March 31, 2021, amount of non-performing unsecured loans outstanding increased to 51,350 million yen (up 23.9% year-on-year) and the ratio of unsecured loans NPL stood at 12.3% (up 1.6pt year-on-year).

The main factors include a decrease in interest repayment claims with attorney involvement and an increase in consolidation of debt that requires a certain amount of time until resolution (installment settlement). In other words, the current situation constitutes a transition in the non-performing loan structure. Although the ratio of NPL is on a rising trend against this background, the resulting ratio of bad debt to operating loans (normal bad debt excluding write-offs related to interest repayment claims) remained low at 2.1%, slightly higher than in the previous year, since the ratio of loans resulting in a write-off did not differ significantly.

Q6Please describe the situation regarding the interest repayment claims.
A6

The situation still requires careful attention although the declining trend in interest repayment claims at AIFUL (non-consolidated) has become more apparent, dropping significantly from the peak of 16,000 cases in February 2011 as more than 10 years have passed since the Supreme Court decision.

Interest repayment claims for the second quarter of the fiscal year ending March 31, 2021,decreased 21.2% year on year, to 2,600. Interest repayment amount decreased 12.0% year on year, to 5,288 million yen, and the waiver of principal accompanying interest repayment declined 17.9% to 420 million yen year on year, totaling 5,708 million yen, or a decrease of 23.1% from corresponding period of previous fiscal year.

Stock Information/ Others

Q1What is the current equity ratio?
A1

The AIFUL Group's equity ratio stood at 16.3% on a consolidated basis and 16.1% on a non-consolidated basis as of the fiscal year ending September 30, 2021.

Q2What are AIFUL's current credit ratings?
A2

Please refer to Corporate Bonds/Rating.

Q3What stock exchanges list the company's shares?
A3

The first sections of the Tokyo Stock Exchange.

Q4What is AIFUL's securities code?
A4

8515.

Q5How many shares are there in a trading unit?
A5

100.

Q6Is there a shareholder gift scheme?
A6

AIFUL has not introduced a shareholder gift scheme.

Q7Who is the transfer agent of the shareholders' register?
A7

The transfer agent of AIFUL's shareholders' register is the Sumitomo Mitsui Trust Bank, Limited. (Please see here for contact details.)

Q8Can you explain the procedure for name and address changes relating to shares?
A8

The various procedures for AIFUL's shares are handled by the Sumitomo Mitsui Trust Bank, Limited which is the transfer agent of the shareholders' register. Please contact the transfer agent of the shareholders' register for details. In addition, shareholders who use the depository system should contact the securities company where they conduct business.

Q9Can you outline historical stock splits and purchases of treasury stock?
A9

Please see here for historical stock splits and purchases of treasury stock.

Q10When is the fiscal year of AIFUL?
A10

AIFUL closes the fiscal year on March 31. AIFUL announces quarterly result.

Q11What is the date of the Monthly Data release?
A11

Monthly Data is announced on the 25th of the following month.
The monthly data for June, September, December and March which are the quarterly fiscal year-ends, will be announced in the same date as the announcement date of each financial period.

Q12When was the company established?
A12

February 1978. See History for a list of AIFUL milestones.

Q13Where can I make an IR-related inquiry?
A13

Please use Contact Details.