ORIX Corporation (NYSE: IX) stock fell over 4.3% on January 28th 2019 (as of 9:35 am GMT-5; Source: Google finance) after the company total revenues declined 18% to 1,796.2 billion yen year on year. Income before income taxes was 295.2 billion yen, which is a 18% decrease year on year, and net income was 236.2 billion yen, which is a decline of 8% year on year. During the third consolidated period, on the back of decreases in gains on sales of shares in Japan and the recognition of losses in overseas affiliates, the net income fell compared to the same period of the previous fiscal year. Annualized ROE was 11.5% which exceeded the mid‐term target of 11%.
Moreover, during the third quarter, services income increased driven by stable fee businesses, despite a decrease in finance revenues in line with a decrease in lease assets. In the same period of the previous fiscal year, gains from selling shares of affiliates and investment securities were recognized. Segment profits decreased by 47% YoY to 19.8 bn yen. Further, Lease assets in the automobile leasing business steadily increased. The revenues from test and measurement instruments and IT‐related equipment rentals business has also increased. However, the segment profits declined by 2% YoY to 30.4 bn yen.
Additionally, the profits of Investment & Operation declined due to decreases in gains on sales of shares and in net income of affiliates. The profits increased in mega‐solar power generation and electric power supply business and in concession business including airport management. The Retail segment profits decreased 51% YoY to 30.4 bn yen. Revenues from life insurance premiums increased due to an increase in in‐force policies. In the banking business, finance revenues increased in line due to an increase in installment loans such as housing loan.
Meanwhile, IX has very recently announced the closing of OREC 2018-CRE1, which is a $350 million commercial real estate (CRE) collateralized loan obligation (CLO). A portfolio of 23 loans secured majorly by newly constructed properties initially backs this. The CLO includes many loans originated for agency takeout through one of ORIX USA’s wholly owned affiliates. The CRE CLO is a natural extension of ORIX USA’s comprehensive platform, with a fully integrated asset management and servicing group. The initial pool comprised of $299.4 million in existing commercial mortgages that were originated between 2014 and 2018 (12 in the past year), and a $50.6 million funded reserve for assets to be acquired during the 120-day ramp-up period