Japan Post Bank Share Sale Announced

We maintain our fair value estimate of JPY 940 for Japan Post Bank 7182 after it and its parent, Japan Post Holdings, announced a public sale in March of some of the Japan Post Bank shares held by Japan Post Holdings, as well as two share buybacks by Japan Post Bank, one on Japan Exchange’s ToSTNet-3 system in early March before the offering and a second one in the market spanning from mid-March until May 12.

Japan Post Holdings’ stake in Japan Post Bank has been 89% since the two companies listed in November 2015, during which time Japan Post Holdings already lowered its stake in Japan Post Bank’s sister company, Japan Post Insurance, from 89% at the time of the IPOs in 2015 to below 50% currently, thereby freeing Japan Post Insurance from some restrictions on its business. However, Japan Post Holdings’ stake in Japan Post Bank has remained at 89% despite Japan Post Holdings’ stated aim to reduce the stake below 50% as soon as possible. This delay, in our view, reflected the larger importance of dividends from Japan Post Bank in delivering cash up to Japan Post Holdings to help maintain the parent’s own dividends to shareholders as well Japan Post Insurance’s greater ability than Japan Post Bank to lift dividend per share.