Aozora Bank Reports Financial Results for the Three Months to …

TOKYO, July 31 /Xinhua-PRNewswire-AsiaNet/ –

Record First Quarter Profit Boosted by Interest Income Growth

Aozora Bank, Ltd., ("Aozora" or the "Bank"; TSE: 8304), a leading Japanese
commercial bank, today reported financial results for the three months ended
June 30, 2007. Fiscal first-quarter net income was the highest since the Bank
began reporting financial results on a quarterly basis in FY2004. These results
highlight Aozora’s continued growth and demonstrate that the group is on track
to achieving its full year earnings projections.

FINANCIAL HIGHLIGHTS: First Quarter FY2007 (Consolidated Basis)

— Net income rose 11.8% to 37.0 billion yen, a record for the first
quarter, driven by higher net interest income related to loan
transactions and securities investments, and the additional recognition
of deferred tax assets.

— Operating profit amounted to 17.2 billion yen representing 57% of the
first half projection, evidence that Aozora is well on track to meet
its target.

— Net revenue fell 5.3% to 27.1 billion yen, with a growing contribution
from net interest income.

— Aozora continued to meet its targets for managing expenses. The Bank
reduced expenses by 6.5% in the first quarter compared with the
preceding quarter. Expenses rose 2.8% versus the same quarter a year
earlier reflecting the overall growth in the Bank’s business.

— Credit related items produced income of 4.7 billion yen compared to
full year projection of net credit related expenses of 3.5 billion yen.
The Bank also booked a 14.9 billion yen gain on deferred income taxes
reflecting management’s confidence in the sustainability of its
earnings growth.

— Aozora maintained its interim and full-year earnings forecasts for
FY2007.

Aozora Bank Chairman Kimikazu Noumi said: "I am very satisfied to report
record-high net income for the fiscal first quarter which creates a strong
platform for the Bank to meet its earnings targets for fiscal 2007. The
results demonstrate the growing success of companywide initiatives to grow our
core businesses as we seek to further strengthen Aozora’s unique position in
the sector and generate sustainable earnings growth."

EARNINGS REVIEW

Net revenue fell 5.3% to 27.1 billion yen in the first three months of
FY2007, as a decline in non-interest income outweighed gains in net interest
income.

The Bank reported a 33.5% rise in net interest income to 14.4 billion yen.
This increase resulted from a 1.5 billion yen rise in dividends on securities,
a 0.7 billion yen gain from a higher average volume of the Bank’s loan book,
and enhanced net interest spreads, which contributed 1.4 billion yen. Aozora
continues to benefit from the efforts of its reorganized sales and marketing
teams, which helped the Bank achieve 17.5% growth in its loan book in FY2006.

Non-interest income declined 28.7% to 12.8 billion yen, reflecting the
absence of a one-time gain of about 3.0 billion yen from the sale of REIT
assets recorded in the same quarter a year ago. Net other operating income
excluding net gains on bond transactions increased 50.4 percent to 12.8 billion
yen helped by a strong contribution from hedge fund investments. The Bank
reported losses of 2.1 billion yen on bond transactions compared with profits
of 4.6 billion a year earlier. In addition to the absence of one-time gains,
the Bank realized losses on holdings of corporate and Japanese government
bonds. Net fees and commissions fell 16.8% to 3.0 billion yen, a consequence
of a slight decline in loans outstanding in the quarter. Aozora reported a
loss on net trading revenue of 0.9 billion yen versus a profit of 1.3 billion
yen in the same quarter a year earlier. This reverse was due to lower than
expected sales of derivative-related products.

General and administrative expenses rose 2.8% to 13.0 billion yen in the
first three months of FY2007, comfortably in line with management targets. The
ratio of expenses to net revenue rose 0.9 % to 47.1% on a rolling quarterly
basis. Business profit declined 11.7% to 14.1 billion yen in the fiscal first
quarter. While operating profit decreased 14.0% to 17.2 billion yen, this was
in line with Bank estimates and Aozora remains firmly on track to meet its
forecast for the fiscal first half ending September 30, 2007.

Extraordinary profit fell 61.5% to 5.1 billion yen due to significantly
lower reversals of reserves for possible loan losses compared with the same
quarter a year ago. Income before income taxes fell 32.8% to 22.2 billion
yen. The Bank booked 14.9 billion yen in deferred income taxes in the quarter
compared with 0.3 billion yen a year earlier, underscoring management
confidence in sustained earnings growth. Credit related expenses fell 64.4% to
4.7 billion yen of profit, evidence of the efficiency of the Bank’s credit risk
management systems. As a consequence, net income rose 11.8% to 37.0 billion
yen a record total for the fiscal first quarter.

BALANCE SHEET SUMMARY

Total assets stood at 6,548.2 billion yen as of June 30, 2007, little
changed from the 6,544.0 billion yen in total assets at March 31, 2007.

As part of ongoing efforts to achieve the optimal balance in our loan
portfolio, Aozora reduced real estate related loans by about 57 billion yen and
lending to the Japanese government by about 25 billion yen in the quarter. As a
consequence, the Bank’s loan book contracted slightly, decreasing by 20.4
billion yen, or 0.6%, to 3,664.2 billion yen. Securities fell 4.7% to 1,828.2
billion yen in the quarter as Aozora reduced its overall holdings of Japan
government debt securities. The Bank also cut its holdings of financial and
treasury bills.

On the funding side, deposits and negotiable certificates of deposit both
declined as the Bank raised its issuance of debentures. Total deposits fell by
145.9 billion yen to 2,185.0 billion yen in the quarter, however Aozora
continued to attract new deposits from retail customers with total retail
deposits growing by about 15 billion to 1,400 billion yen in the quarter.
Total liabilities declined 17.4 billion yen to 5,734.1 billion yen.

OPERATIONAL HIGHLIGHTS (FY2007 Q1)

— On April 11, 2007, Aozora announced the launch of a corporate
rehabilitation fund with The San-in Godo Bank Ltd., dedicated to
assisting small and medium-sized businesses based in Japan’s regional
markets. By partnering with Japanese regional lenders to offer
financing solutions to corporate borrowers under rehabilitation, Aozora
aims to win new business opportunities and contribute to the
revitalization of regional economies. San-in Godo is a major regional
lender based in Shimane Prefecture in Western Japan.

— On May 15, 2007, Aozora launched a new representative office in
Shanghai, the Bank’s first presence in China. Initially serving as a
base for information gathering and research activities the new Shanghai
office brings Aozora’s network of overseas representative offices to
five.

— On May 24, 2007, Aozora announced a comprehensive business alliance
with The Bank of Yokohama, Ltd., to supplement the development of the
Bank of Yokohama’s investment banking business. This business tie-up
presents an opportunity for mutual business expansion through the joint
provision of a diverse range of financial solutions for the investment
banking needs of The Bank of Yokohama’s corporate customers.

— In June 2007, Standard & Poor’s raised its long-term credit rating on
Aozora to "A-" from "BBB+". This came a month after Moody’s Investors
Service raised its long-term rating on the Bank to "A2" from "Baa1".

— On June 27, 2007, shareholders approved the appointment of
Mr. Federico J. Sacasa as President and Chief Operating Officer of
Aozora at the Bank’s first Annual General Shareholders’ Meeting.

OUTLOOK

Aozora reiterated its projections for net income of 84.5 billion yen,
operating profit of 66.5 billion yen and net revenue of 126.0 billion yen for
the full fiscal year ending March 31, 2008. The Bank also maintained its
interim forecasts for net income of 46.5 billion yen and operating profit of
30.0 billion yen for the six months ending September 30, 2007.

About Aozora Bank:
Aozora Bank, Ltd. is a leading provider of lending, securitization,
business and asset revitalization, asset management, loan syndication and
investment advisory services to financial institutions, corporate and retail
customers. Originally established in 1957 as the Nippon Fudosan Bank, Ltd.,
the Bank changed its name to Aozora Bank, Ltd. in 2001. In 2003, it become
majority owned by Cerberus NCB Acquisition, L.P. Aozora is proud of its
heritage and the long-term relationships it has developed with corporate,
financial and individual customers over the years. Building on this heritage,
Aozora has created a strong customer-oriented and performance-based culture
that will contribute to both innovative business solutions for customers and
sustainable earnings growth for investors and shareholders. On November 14,
2006, Aozora successfully listed its shares on the First Section of the Tokyo
Stock Exchange.

Detailed disclosure and analysis of Aozora Bank’s fiscal 2007 first quarter
earnings is also available at http://www.aozorabank.co.jp/en/company/ .

Media Contact:

Aozora Bank
Masaaki Harada
Tel: +81-3-3263-1111

SOURCE Aozora Bank, Ltd.