Jimoto Holdings Inc., which operates two regional banks in northeastern Japan, is set to effectively come under state control after struggling to repay public funds due in September, sources close to the matter said Monday.
The Financial Services Agency will acquire 63 percent of voting rights in the company as the banking group plans to forgo paying dividends for preferred shares issued to the government.
The development comes as Jimoto Holdings, which operates Kirayaka Bank Ltd. in Yamagata Prefecture and Sendai Bank Ltd. in Miyagi Prefecture, reported a consolidated 23.4 billion yen ($150 million) net loss for the financial year ended March 2024.
While about 70 percent of listed regional banks in Japan saw increased profits for the year to March, there are lenders mired in red ink, highlighting the difficult economic conditions faced in less urban areas.
In April, Jimoto Holdings said that of 78 billion yen of public money injected into its two banks in the form of preferred shares, it would not be able to repay 20 billion yen, received in 2009 and due for repayment in September this year, and would begin discussions with the government on a possible extension of the repayment deadline.
It also said then that President Takashi Suzuki and Chairman Koji Kawagoe would resign to take responsibility for the red ink and the failure to pay dividends.
The FSA will have authority over the selection of successors and other key decisions once the company falls under state control. The government will receive the voting rights after the decision to forgo paying dividends is made official at a shareholders' meeting in June.
The company's losses resulted from the deterioration of some of its borrowers' businesses.
While the government did briefly hold majority voting rights in Sendai Bank when the bank forwent dividends for the year ended March 2012, the rights were never exercised as they were annulled with the establishment of Jimoto Holdings in October of that year.
