November 14, 2017 / 7:07 AM / a year ago

UPDATE 2-Banking arm helps Japan Post's H1 profit jump, but mail business weak

* H1 net profit up 20.3 pct to 180.1 bln yen

* Banking unit H1 net profit up 20.2 pct to 181.5 bln yen

* Govt has not yet finalised further sale of its shares -finmin

* Japan Post maintains 400 bln yen full-year profit forecast (Adds details of past share sales, finance minister comments)

By Thomas Wilson

TOKYO, Nov 14 (Reuters) - Japan Post Holdings Co Ltd’s six-month net profit rose by a fifth as its banking unit again helped offset weakness at its mail business, underscoring its reliance on the arm as the government cuts its stake in the postal and financial giant.

Japan Post’s profit for April-September was 180.1 billion yen ($1.59 billion), with net profit at Japan Post Bank Co surging 20.2 percent to 181.5 billion yen on foreign exchange trading gains, which made up for diminishing returns on its huge Japanese government bonds (JGBs) holdings.

The results, announced on Tuesday, were the first look at Japan Post’s health after the government’s 1.3 trillion yen share sale in September and come amid investors’ concerns about clear growth prospects for the firm.

The share sale, popular with domestic retail investors for its relatively high dividend yield, followed a mammoth triple initial public offering of Japan Post two years ago and reduced the government’s stake in the company to under 60 percent.

On Tuesday, Finance Minister Taro Aso said the government hadn’t yet worked out details of a further sale of its stake after a report that it could sell as much as 1.4 trillion yen ($12.3 billion) in shares as early as April.

Japan Post’s shares have fallen 13 percent so far in 2017 compared to the 17 percent rise of the benchmark Nikkei average over the same period. Japan Post was the tenth worst performer on the Nikkei average this year until Tuesday.

The banking unit, of which Japan Post owns 74 percent, is the country’s biggest deposit taker. It makes money from returns on its JGB holdings, instead of relying on loans like commercial lenders.

But under the Bank of Japan’s negative interest rate policy it has been forced to diversify its investments to boost returns. Its holdings of low-yield JGBs totalled 31.1 percent of total assets at the end of September, or 64.5 trillion yen, down marginally from the 32.2 percent three months earlier.

The postal services unit showed a loss of 17.1 billion yen for the six months as labour costs rose, though that was down from the 28.7 billion yen loss of the year-ago period. Japan Post runs the nation’s 24,000-strong network of post offices.

The group’s third listed unit, Japan Post Insurance Co , said April-September profit grew 20.6 percent from the year-ago period to 51.2 billion yen. Profit at the unit rose on an increase in premiums for medical, cancer and long-term care insurance.

Japan Post maintained its full-year net profit forecast of 400 billion yen. ($1 = 113.6200 yen) (Reporting by Thomas Wilson; Editing by Muralikumar Anantharaman)

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