SBI Shinsei Bank reaches agreement on public funds repayment scheme
As part of its efforts to enhance the corporate value of its banking group, SBI Shinsei Bank has been closely working with its parent company, SBI Holdings, and has been consulting with the government regarding the repayment of public funds, which is an important management issue. On Friday, SBI Shinsei Bank has concluded an "Agreement on Confirmed Repayment Scheme" with the Deposit Insurance Corporation of Japan, the Resolution and Collection Corporation, and SBI Holdings.
Details
SBI Shinsei Bank has concluded this agreement regarding the specific method of repaying public funds, which it aimed to agree upon by the end of June 2025, based on the "Contract on Handling of Public Funds" concluded on May 12, 2023, with the Deposit Insurance Corporation of Japan, the Resolution and Collection Corporation, and SBI Holdings.
Based on this agreement, SBI Shinsei Bank will convert all common shares held by the Deposit Insurance Corporation of Japan and the Resolution and Collection Corporation into preferred shares. Subsequently, SBI Shinsei Bank will repay 100 billion yen as a special dividend on the preferred shares as of March 28, 2025. To secure funds for this repayment, SBI Shinsei Bank will dispose of treasury shares to SBI Holdings as the subscriber, raising 50 billion yen.
Furthermore, in order to fully repay the public funds as early as possible, in addition to the repayment of 100 billion yen through the special dividend mentioned above, SBI Shinsei Bank will consider making additional repayments through additional special dividends after completing the necessary procedures, including amendments to the Articles of Incorporation. Any additional repayment of public funds through additional special dividends will be carried out after thoroughly considering the impact on its shareholder structure, capital position, business operations, financial soundness, and business growth.
In addition to the above special dividends, as a minimum measure to ensure the repayment of public funds, from the fiscal year ending March 2026 onwards, SBI Shinsei Bank will establish a certain priority framework (45 billion yen in total for the Deposit Insurance Corporation of Japan and the Resolution and Collection Corporation) for dividends (ordinary dividends) on preferred shares to be paid to the Deposit Insurance Corporation of Japan and the Resolution and Collection Corporation each fiscal year. If it is possible to increase dividends beyond this priority framework, taking into account annual performance and capital conditions, SBI Shinsei Bank intends to further increase the ordinary dividends.
SBI Shinsei Bank aims to fully repay the public funds as early as possible through the repayment of 100 billion yen by special dividend, additional repayments through additional special dividends, and repayments through annual ordinary dividends. At the same time, SBI Shinsei Bank will implement various measures such as flexible business operations in response to the business environment, continuous review of the group structure, and capital policies including relisting.
Last year, SBI Shinsei Bank repaid a portion of approximately 19.4 billion yen in public funds for the first time since 2006. With the conclusion of this agreement, SBI Shinsei Bank believes it has clearly established a path toward repaying and ultimately fully settling the public funds, which has been a management issue for nearly a quarter of a century. SBI Shinsei Bank deeply appreciates the public's tremendous support thus far, and will focus on strengthening its profitability and further enhancing its corporate value, returning to the fundamentals of financial services, thoroughly implementing customer-centricity, and striving to further improve services to its customers. Contact Information
Overview of the Confirmed Public Funds Repayment Scheme
Under Japanese legal, accounting, and tax systems, when the source of a dividend paid on shares is "other capital surplus," it is treated as a return of capital from the issuer, and the shareholder receiving the dividend will reduce the book value of the shares that are the subject of the dividend by the amount of the dividend received. Therefore, in the confirmed repayment scheme, when the source of dividends on preferred shares is "other capital surplus," it will be treated as a repayment of public funds, and each time a dividend is paid, the dividend amount will be deducted from the public funds to be recovered.
The special dividend of 100 billion yen scheduled to be implemented by the Bank on March 28, 2025, is planned to be sourced entirely from "other capital surplus," and therefore the entire amount will be treated as a repayment of public funds. In addition, the "ordinary dividends" on preferred shares that the Bank plans to pay for fiscal years from the year ending March 2026 onwards will also be largely sourced from "other capital surplus," and to that extent, will be treated as repayment of public funds, with the amount sourced from "other capital surplus" deducted from the public funds to be recovered each time a dividend is paid.
It should be noted that, subject to regulatory approval, the Bank plans to reorganize its capital accounts (capital reduction) effective March 19, 2025, which will increase the Bank's "other capital surplus" to 372.7 billion yen, securing a sufficient amount as a source for repayment of public funds to be recovered.
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