May 15, 2017 / 10:49 AM / in 2 months

Japan Post to swing to profit this year, still hungry for M&A

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FILE PHOTO: A woman walks past an advertisement board of Japan Post at its headquarters in Tokyo, Japan January 30, 2017.Kim Kyung-Hoon/File Photo

TOKYO (Reuters) - Japan Post Holdings Co (6178.T) on Monday forecast a return to profit this year and said it would continue growing through acquisitions, despite taking a hit from a massive writedown on its Australian logistics unit.

Chief Executive Masatsugu Nagato said Japan Post would keep looking at possible domestic and foreign takeover candidates, but did not directly address reports that the company was considering buying a majority stake in Nomura Real Estate Holdings (3231.T).

"I'll look regularly at anything with the potential to boost the Japan Post Group's overall growth and performance," he said at an earnings briefing.

A source familiar with the matter told Reuters on Saturday Japan Post had entered unofficial talks with a major shareholder of Nomura Real Estate in a potential deal likely to be worth several billions of dollars.

Nomura Real Estate said it had no information to immediately announce.

The timing of the acquisition, if realized, could raise eyebrows as Japan Post and other Japanese companies have stunned investors recently with losses on M&A deals that have turned sour, raising questions about due diligence and post-merger integration.

But facing a lack of domestic growth prospects and heavily exposed through a 74 percent stake to the performance of its banking firm, Japan Post remained committed to growth through acquisitions.

The company forecast a profit of 400 billion yen ($3.5 billion) in the year to March, beating analysts' estimates.

Its cash reserves amounted to 53 trillion yen at the end of March.

For the year just ended, Japan Post said it reported a 29 billion yen loss, lower than its earlier estimate of a 40 billion yen loss.

The loss was driven by a 400 billion yen writedown on Toll Holdings, which Japan Post bought in 2015.

Its banking arm, Japan Post Bank Co (7182.T), forecast profit at 350 billion yen for this fiscal year. Its profit fell 4 percent in the year ended March, as interest on Japanese government bonds fell.

Unlike commercial lenders that make money from loans, Japan Post Bank - the nation's biggest deposit taker - relies in part on returns from its holdings of Japanese government bonds, which make up a third of its assets.

The third listed unit, Japan Post Insurance Co (7181.T) said annual profit rose 4 percent last year to 88.5 billion yen as premiums from new insurance contracts grew.

Reporting by Thomas Wilson; Editing by Randy Fabi

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