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Q1Please describe the situation regarding the financial results for the third quarter of fiscal year ending March 31, 2020.
A1

During the nine months ended December 31, 2019, Japanese economy expanded gradually as result of improvement in employment and income environment. However, the outlook for the economy remains uncertain due to the impact of overseas economic trends and the consumption tax hike.
In the consumer finance industry, the number of new contracts at major players remained stable, and the operating loan balance increased moderately. On the other hand, interest repayment claims, industry’s biggest risk, still require close monitoring even though they have declined significantly from their peak in current fiscal year.
Under these circumstances, while dealing with interest repayment claims as the principal management issue, the AIFUL Group will work to diversify the financial services business and expand operating assets on a group-wide basis and, to manage its business with an emphasis on balancing safety, profitability and growth.

The AIFUL Group’s consolidated operating revenue for the third quarter of the fiscal year ending March 31, 2020 rose 8.3% compared with the corresponding period of the previous fiscal year, to 93,192 million yen. The principal components were 53,363 million yen in interest on loans (up 8.9% year on year), 13,176 million yen in revenue from the credit card business (up 8.7% year on year) and 11,323 million yen in revenue from the credit guarantee business (up 9.3% year on year). Also, the collection from purchased receivables were 1,293 million yen (down 3.0% year on year) and the recoveries of written off claims were 5,210 million yen (up 6.6% year on year).
Operating expenses increased by 6,265 million, or 8.3%, compared with the corresponding period of the previous fiscal year, to 81,686 million yen. It was chiefly due to the provision for allowance for doubtful accounts increased 5,171 million yen, or 23.0% to 27,626 million yen due to a growing operating asset.
As a result, AIFUL Group posted operating profit of 11,506 million yen (up 8.3% year on year) and ordinary profit of 12,225 million yen (up 7.4% year on year). Profit attributable to owners of parent stood at 11,749 million yen (up 10.3% year on year), reflecting a loss attributable to non-controlling interests of 939 million yen.

Q2Please describe the situation regarding the consolidated outlook for the fiscal year ending March 31, 2020.
A2

In the industry to which the AIFUL Group belongs, the number of new contracts remained solid mainly due to recovery in business confidence and aggressive advertising by major players, and also the operating loan balance increased gradually. On the other hand, interest repayment claims, industry’s biggest risk, still require close monitoring even though they have declined significantly from their peak in current fiscal year.

In this environment, while dealing with the principal management issue of interest repayment claims, it is taking measures to diversify the financial business and increase operating assets. The Group is also working to diversify funding channels to strengthen its financial base and improve business efficiency across the Group.

With regard to its earnings forecasts for the fiscal year ending March 2020, the AIFUL Group expects to record operating revenue of 125,100 million yen (up 8.5% year on year), operating profit of 14,400 million yen (up 375.1% year on year), ordinary profit of 15,400 million yen (up 274.7% year on year), and profit attributable to owners of parent of 14,400 million yen (up 54.1% year on year).
Actual results may differ from forecast values due to various risk factors such as trend in interest repayment in the business environment that surrounds the Company.

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 demand for funds for interest repayments was heavy and severe in the previous fiscal year. Also, distributable amount remains negative. For this reason, the Group sincerely regrets that it will not pay a dividend for the fiscal year under review.

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

During the nine months ended December 31, 2019, Japanese economy expanded gradually as result of improvement in employment and income environment. However, the outlook for the economy remains uncertain due to the impact of overseas economic trends and the consumption tax hike.
In the consumer finance industry, the number of new contracts at major players remained stable, and the operating loan balance increased moderately. On the other hand, interest repayment claims, industry’s biggest risk, still require close monitoring even though they have declined significantly from their peak in current fiscal year.
Under these circumstances, while dealing with interest repayment claims as the principal management issue, the AIFUL Group will work to diversify the financial services business and expand operating assets 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 10.5 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 March 2019, the overall market remained flat at 10.5 trillion yen, partly due to financial institutions’ voluntary restraints on advertising. Of the 10.5 trillion yen, outstanding loans by consumer finance companies grew 4% from the previous year to 2.5 trillion yen.

Business Performance

Q1Please describe the situation regarding the loan business.
A1

In the loan business, in order to increase the number of new contracts and the operating loan balance, AIFUL made efforts to improve services to customers by enhancing the functions of chat services etc. in addition to effective advertising development mainly through TV commercials and websites.
As a result, in the third quarter of fiscal year under review, new contracts signed for unsecured loans were 152 thousand (up 0.6% year on year) and the contract rate was 43.2% (down 2.6pt year on year).
Also, unsecured loans outstanding at the end of the fiscal year under review was 408,703 million yen (up 7.7% from the end of previous fiscal year), secured loans outstanding was 7,322 million yen (down 21.3% from the end of previous fiscal year), small business loans outstanding was 8,172 million (up 3.2% from the end of previous fiscal year) and the total balance of operating loans for the loan segment was 424,198 million yen (up 7.0% from the end of previous fiscal year).

Q2Please describe the situation regarding the credit card business.
A2

In the credit card business, LIFECARD worked to expand the number of new applications through aggressive affiliate advertising and issuing new tie-up cards as well as an affiliated credit card with university hospitals. Also, it endeavored to expand credit limits and expanded services for small medium sized enterprises to increase convenience for card members.
As a result of the above, transactions volume for the third quarter of fiscal year ending March 2020, were 529,827 million yen (up 1.8% year on year), while the balance of installment accounts receivable for credit card business stood at 108,379 million yen (up 4.1% from the end of previous fiscal year).

Q3Please provide an overview of credit guarantee business situation.
A3

In the credit guarantee business, we made the most of our know-how related to credit operations for individuals and small- and medium-sized enterprises and the unique strengths we possess as an independent organ to expand the credit guarantee outstanding at both AIFUL and LIFECARD by making efforts to increase the diversity of new products and the number of guarantee partners.

As a result, credit guarantee outstanding at the end of the third quarter of fiscal year ending March 2020, was 117,770 million yen (up 19.0% from the end of previous fiscal year). Of which, the balance credit guarantees for individuals were 100,743 million yen (up 17.9% from the end of previous fiscal year) and for business operators were 17,027 million yen (up 25.2% 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, China, and Indonesia, where we offer consumer finance, lease, and used car loans to local customers.

Of these group companies, AIRA & AIFUL Public Company Limited (A&A), which operates in Thailand, is making efforts to acquire high-quality customers in order to improve the quality of its credit portfolio.

As a result, at the end of the third quarter of fiscal year ending March 2020, number of accounts were 340,000 (down 4.6% from the end of previous fiscal year) and loans outstanding were 21,644 million yen (down 3.6% from the end of previous fiscal year). (Since A&A’s accounting period is December, the number of accounts and outstanding loans are as of September 2019.)

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

In the third quarter of fiscal year ending March 2020, amount of non-performing unsecured loans outstanding increased to 46,059 million yen (up 19.8% year-on-year) and the ratio of unsecured loans NPL stood at 11.2% (up 0.8pt 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 2.9%, 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 third quarter of FY ending March 2020, decreased 24.0% year on year, to 9,800.
Interest repayment amount increased 8.2% year on year, to 9,584 million yen, and the waiver of principal accompanying interest repayment declined 27.3%, to 863 million yen year on year, totaling 10,447 million yen, or an increase of 4.6% 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 16.5% on a consolidated basis and 16.3% on a non-consolidated basis as of the third quarter of fiscal year ending March 31, 2020.

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.

Q12What is the origin of the AIFUL company name?
A12

The company name "AIFUL" represents a company that approaches its work with Affection and Improvement and earns the Faithfulness of its customers as it abounds with Unity and Liveliness. The name was decided in an in-house competition.

Q13When was the company established?
A13

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

Q14Where can I make an IR-related inquiry?
A14

Please use Contact Details.