Suruga Bank Slashes FY 2017 Profit on Rise in Loss Reserves over Fraud

June 7, 2018

Tokyo- Scandal-hit Suruga Bank said Wednesday that the regional lender has revised down its fiscal 2017 group net profit by about two-thirds, due to an increase in loan-loss reserves as more fraudulent cases may be confirmed over lending.

Following an instruction by an auditing firm, the bank, based in the city of Numazu, Shizuoka Prefecture, central Japan, added 4,825 million yen to reserves for potential losses from loans to share-house owners, while newly booking reserves of 15,521 million yen for lending to investors of other properties, such as apartments.

As a result, its net profit in the year through last March, originally announced last month, was slashed from 21,065 million yen to 6,988 million yen, now down 83.6 pct from the previous year.

The bank's loss reserves for real estate investment-related loans for fiscal 2017 increased to 58.8 billion yen.

Many owners of share houses who bought the properties with loans from Suruga Bank have faced difficulties repaying the loans as Tokyo-based share house operator Smart Days Inc. ran into management trouble and stopped paying rents to them. Smart Days collapsed in April.

Suruga Bank has announced that its documents on the screenings of the share house-related loans have been manipulated or fabricated.

The possibility of similar fraud has emerged over documents on the screenings of loans for investment in other properties.

The bank said Wednesday that it carefully examined whether there are risks similar to those related to the share house loan cases and estimated necessary reserves.

The bank left unchanged its earnings projections for fiscal 2018, which started in April. Jiji Press