Japan's Aeon Bank To Take Over Incubator Bank At Year's End

The Deposit Insurance Corp. of Japan said Friday that Aeon Bank will pay 1.98 billion yen (US$25.64 million) to obtain failed Incubator Bank of Japan's assets and deposits.

The Aeon Co. (TSE:8267) unit will acquire at the end of the year a 100 per cent stake in the Second Bridge Bank of Japan, which took over Incubator Bank's loans that were deemed sound. The bridge bank has assets and liabilities effectively totaling 170 billion yen, with loans assets constituting 30 billion yen. Roughly 26 billion yen of loss reserves has been set aside by the deposit insurer, an amount equivalent to more than 80 per cent of the loan balance. The condition of borrowers is said to have worsened significantly in the meantime.

"It was really that bad," Deposit Insurance Corp. Governor Masanori Tanabe told a news conference Friday, defending the move to book the large loss reserves.

Separately, Aeon Bank will acquire a portion of Incubator Bank's nonperforming loans, which carry a book value of 10 billion yen, for 500 million yen.