Suruga Bank to Book Losses Tied to Loan Scandal

May 8, 2018

Tokyo- Japanese regional lender Suruga Bank will book losses for fiscal 2017 following the recent bankruptcy of a Tokyo-based operator of shared housing, informed sources said Monday.

The losses could reach tens of billions of yen.

Suruga Bank, based in Numazu in the central prefecture of Shizuoka, lent a total of some 100 billion yen to investors to help them buy shared housing units from Smart Days Inc., which went bust last month.

The bank will expand its loan-loss reserves as the number of owners unable to repay loans is growing due to the bankruptcy.

Suruga Bank is holding talks with most of about 700 shared house owners to review their loan terms, such as by lowering interest rates and granting repayment moratoria.

It is examining the risks that loans will not be repaid, based on the owners' ability to repay and the values of the shared housing units and the land, both used as collateral.

The bank's bottom line for the year through March, to be announced on May 15, is expected to fall far short of its current projection of 43 billion yen in profit.

In April, the Financial Services Agency carried out an on-site inspection of Suruga Bank, suspecting that some Smart Days-related loans were extended based on forged application documents.

Smart Days subleases mainly to female students the shared housing units it leased back from the owners, many of whom took out loans from Suruga Bank. Smart Days guaranteed payments of prefixed amounts to these owners as rents.

The bankruptcy, stemming from sluggish occupancy rates, has made it harder for many owners to repay loans to Suruga Bank.

Many of the investors are corporate workers. Some borrowed more than 100 million yen from Suruga Bank. Jiji Press