IYBank Co., a newcomer to the banking industry, said Friday it suffered net losses of 5.7 billion yen in the fiscal 2001 first half as the bank cut fees and expanded its network of automated-teller machines.

The bank, which generated revenue of 34 million yen, also posted a 4.7 billion yen net business loss for the period.

In the business year through the end of March 2002, the bank expects to log a net loss of 13.2 billion yen.

"We've had a slower first year than originally planned," IYBank President Takashi Anzai told a news conference, announcing the bank's first half-year earnings result. "Going into the black in our second year is going to be unlikely."

IYBank, owned 51 percent by retail giant Ito-Yokado Co. and 49 percent by Seven-Eleven Japan, launched operations in May. It hopes to specialize in settlement services at convenience stores and supermarkets operated by the Ito-Yokado group. By operating almost entirely through ATMs, the bank seeks to earn profits by keeping costs low while offering customers 24-hour, year-round service.

IYBank's initial struggles are a sign of troubles in the banking sector in general. Weighed down by problem debts and slumping shareholdings, banks have been reluctant to pay initial system costs so that their customers can withdraw or deposit money at IYBank ATMs.

This has limited commission revenues from other banks' customers, while operating costs remain as high as 4.9 billion yen to cover security, advertising, personnel and machine-maintenance costs.

But Anzai said he is sure that there is a demand for convenient banking services, and that the bank will make a profit in its third year.

IYBank had 15,600 accounts totaling 2 billion yen at the end of October.

Anzai noted that as more users are becoming aware of ATMs at convenience stores, the increase in transactions per ATM more than doubled the rate of new ATMs being installed.

Many banks want to have their ATMs linked with our services in the long run, he said.

At the end of September, IYBank had 1,605 ATMs at convenience stores run by Ito-Yokado's subsidiary Seven-Eleven Japan Co. That number is set to grow to around 3,600 by the end of March.