Acom Return to Profit Boosts Japanese Lender Shares (Update1)

Oct. 19 (Bloomberg) -- Acom Co., Japan's second-largest consumer finance firm by market value, rose the most in eight years in Tokyo, leading consumer lenders higher after reporting a return to profit for its fiscal first half.

Shares of Acom rose 18 percent, the biggest percentage gain on the MSCI World Index, to 2,640 yen on the Tokyo Stock Exchange. Takefuji Corp., the third-biggest lender, climbed 17 percent as the index of 35 non-banks marked the largest increase among 33 industry groups on the benchmark Topix.

Japan's four biggest consumer lenders, including Aiful Corp. and Promise Co., are returning to profit after posting a record 1.8 trillion yen ($16 billion) combined net loss last year. Acom yesterday said first-half operating profit -- revenue minus costs and administrative expenses -- was 63 percent more than forecast.

``Acom looks more profitable than people thought after its operating and current profits exceeded forecasts,'' said Minoru Hattori, an analyst at Okasan Securities Co. ``The stock is being bought back after the sell off.''

Consumer finance stocks plunged last year after Japan's government reined in charges almost half again higher than the top rate on bank loans. Earnings evaporated as tighter accounting rules forced lenders to bolster provisions against claims for refunds of interest ruled excessive by courts.

Aiful, the biggest consumer lender by assets, lost 66 percent of its market value in 2006 and has fallen a further 32 percent this year. Acom fell 47 percent last year and slid a further 34 percent in 2007.

Returning to Profit

The lenders all forecast returns to profit for the current fiscal year. Acom's preliminary earnings report yesterday showed net income of 24.8 billion yen for the six months ended Sept. 30, less than the forecast 29.5 billion yen but reversing a loss of 282 billion yen a year earlier. The Tokyo-based company said declines in the value of securities it owns caused profit to miss its expectations.

The four consumer lenders plan to report first-half results next month. Takefuji will probably return to a profit of 53.6 billion yen this year, Aiful 32 billion yen and Promise 14 billion yen, according to forecasts by the lenders in May.

``Expectations are rising that earnings may look better than expected,'' said Hideo Arimura, who helps oversee $26 billion at Mizuho Asset Management Co. in Tokyo. ``That could push up the stock prices until actual earnings start to come out.''

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.netKomaki Ito in Tokyo at kito@bloomberg.net.

To contact the editor responsible for this story: Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net