Installment Loans

12 Months Ended

Mar. 31, 2023

7. Installment Loans

The composition of installment loans by domicile and type of borrower at March 31, 2022 and 2023 is as follows:


	Millions of yen
	2022		2023
Borrowers in Japan:
Consumer—
Real estate loans	¥	2,007,570	¥	1,949,865
Card loans		173,687		171,635
Other		27,770		29,688

		2,209,027		2,151,188

Corporate—
Real estate companies		278,607		296,228
Non-recourse loans		74,085		124,499
Commercial, industrial and other companies		168,607		165,951

		521,299		586,678

Borrowers in overseas:
Consumer—
Real estate loans		105,860		107,094
Other		30,136		43,054

		135,996		150,148

Corporate—
Real estate companies		273,789		277,839
Non-recourse loans		80,918		38,654
Commercial, industrial and other companies		627,828		660,840

		982,535		977,333

Purchased loans*		13,747		12,255

	¥	3,862,604	¥	3,877,602

*	Purchased loans represent loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely.

Generally, installment loans are made under agreements that require the borrower to provide collateral or guarantors.

At March 31, 2023, the contractual maturities of installment loans (except purchased loans) for each of the next five years and thereafter are as follows:


Years ending March 31,	Millions of yen
2024	¥	522,101
2025		429,107
2026		411,787
2027		270,538
2028		224,434
Thereafter		2,007,380

Total	¥	3,865,347

Revenues from installment loans which are included in finance revenues in the consolidated statements of income are ¥169,401 million, ¥174,485 million and ¥192,375 million for fiscal 2021, 2022 and 2023, respectively.

Certain loans, for which the Company and its subsidiaries have the intent and ability to sell to outside parties in the foreseeable future, are considered held for sale and are carried at the lower of cost or market value determined on an individual basis, except loans held for sale for which the fair value option was elected. A subsidiary elected the fair value option on its loans held for sale. The subsidiary enters into forward sale agreements to offset the change in the fair value of loans held for sale, and the election of the fair value option allows the subsidiary to recognize both the change in the fair value of the loans and the change in the fair value of the forward sale agreements due to changes in interest rates in the same accounting period. Loans held for sale are included in installment loans, and the outstanding balances of these loans as of March 31, 2022 and 2023 were ¥155,680 million and ¥201,355 million, respectively. There were ¥151,601 million and ¥197,041 million of loans held for sale as of March 31, 2022 and 2023, respectively, measured at fair value by electing the fair value option.

Purchased loans acquired by the Company and its subsidiaries are generally loans with evidence of deterioration of credit quality since origination and for which it is probable at acquisition that collection of all contractually required payments from the debtors is unlikely and characterized by extended period of

non-performance

by the borrower, and it is difficult to reliably estimate the amount, timing, or nature of collections. Because such loans are commonly collateralized by real estate, the Company and its subsidiaries may pursue various approaches to maximizing the return from the collateral, including arrangement of borrower’s negotiated transaction of such collateral before foreclosure, the renovation, refurbishment or the sale of such loans to third parties. Accordingly, although the acquired assets may remain loans in legal form, collections on these loans often do not reflect the normal historical experience of collecting delinquent accounts, and the need to tailor individual collateral-realization strategies often makes it difficult to reliably estimate the amount, timing, or nature of collections. Accordingly, the Company and its subsidiaries use the cost recovery method of income recognition for such purchased loans. The total carrying amounts of these purchased loans were ¥13,747 million and ¥12,255 million as of March 31, 2022 and 2023, respectively, and the fair value at the acquisition date of purchased loans acquired during fiscal 2022 and 2023 were ¥4,926 million and ¥2,444 million, respectively.