This is banking in Japan, US-private-equity style. This is what you get when you let private equity 're-capitalize' 'failed' banks. They get handouts from the government, lose more money, get more handouts and tax breaks, and then try to pull off merger deals that benefit them and the major stockholders who are allied with them (as in the case of Shinsei, since otherwise JC Flowers wouldn't be able to control Shinsei bank otherwise).
http://www.businessweek.com/news/2010-01-17/aozora-says-resolving-merger-disagreements-trumps-deadline.html “It is our intention to make the merger happen because we signed the agreement,” Prince said. “If it doesn’t happen we’ll deal with it.” Prince, the fourth CEO to lead Aozora since 2007, was previously an executive with Shinsei and Lehman Brothers Holdings Inc. in Tokyo. He said no decision has been made on any role he may play after the merger. At Shinsei, Prince led a drive to cut bad loans after the bank became the first Japanese lender to be acquired by foreign investors, including Ripplewood Holdings Inc., in 2000. Aozora is the second-largest lender to Aiful Corp., the Japanese consumer lender that staved off bankruptcy last month after 65 creditors agreed to a delay in loan repayments. The bank had 37.9 billion yen in loans to Aiful, and 17.4 billion yen in loans to its Life Co. credit card unit, according to a financial presentation by Aozora in November. Aozora is “overhedged” on the loans to Aiful, holding credit default swaps with a notional value in excess of $37.9 billion yen, Chief Financial Officer Masaki Tanabe said in the interview. Credit-Default Swaps Aiful’s agreement with lenders to postpone repayments triggered a settlement auction of credit-default swaps. Aozora wants to collect “as much as possible without creating too much friction” on the derivatives, Prince said. Aozora posted net income of 6.5 billion yen in the first half ended Sept. 30, compared with a loss of 28 billion yen a year earlier. Prince said he is sticking to the bank’s full-year profit forecast of 5 billion yen as the lender wants the opportunity to make sure its balance sheet is “clean.” http://www.reuters.com/article/idUSTRE60009O20100101 Shinsei, Aozora may see merger delay: report TOKYO Fri Jan 1, 2010 12:55am EST TOKYO (Reuters) - Shinsei Bank (8303.T) and Aozora Bank (8304.T) may have their planned merger delayed, due to difficulty integrating systems and depending on the outcome of an inspection by Japan's financial regulator, the Nikkei newspaper said. Deals | Japan The two mid-size lenders have said they aim to merge by October 2010, but that plan has so far made little progress due to indecision over which system the new bank will use, the Nikkei said on Friday, without citing sources. The banks are also undergoing inspections by the Financial Services Agency to gauge the state of their lending and assets, the Nikkei said. Based on the outcome of the inspections in February, the banks could potentially need to rejig their one-for-one merger ratio, the paper said. Shinsei is about one-third by buyout firm JC Flowers and Co, while Aozora is majority owned by Cerberus Capital Management CBS.UL. The banks announced their plans to merge in July, just months after booking a combined loss of 385.6 billion yen ($4.2 billion) for the year to March 2009. Earnings at both banks have since rebounded, with the two reporting net profits in the first two quarters of this financial year. "Their earnings and stock prices have stopped worsening, so that has lessened their sense of urgency and been the main factor why talks have not accelerated," the Nikkei quoted an FSA official as saying. No one was available to comment at Aozora or Shinsei. Offices in Japan were closed for the New Year holiday. http://www.reuters.com/article/idUSTRE55T1A820090630 excerpt TOKYO (Reuters) - Japan's Shinsei Bank and Aozora Bank, two loss-making lenders backed by U.S. investors, are likely to announce plans on Wednesday to merge by next year, two sources familiar with the matter said. Deals | France | Japan The deal, which will create Japan's sixth-largest bank by assets, will likely be completed by the autumn of 2010, said the sources, who declined to be identified because the information is not yet public. The merger ratio is likely to be set at one-to-one, the Nikkei newspaper said, without saying where it got the information. That would give Shinsei (8303.T) 55.5 percent of the new entity and Aozora (8304.T) 44.5 percent, according to Reuters calculations. "Shinsei has a retail franchise and deposit network that Aozora lacks and Aozora has a relatively stronger capital base," said Kristine Li, Japan banking analyst at KBC Securities. "But they need to come up with a better strategy to survive and be profitable in this very competitive market." Norito Ikeda, a former president of Japanese regional lender Ashikaga Bank, will take the helm of the merged entity, the Nikkei said. The banks last week acknowledged for the first time that they were in merger talks. Domestic media had previously reported that disagreements between the banks' major shareholders had sidelined the discussions. Aozora is majority owned by Cerberus Capital Management CBS.UL, while Shinsei is about one-third owned by buyout firm JC Flowers and Co. Representatives of Shinsei and Aozora declined to comment. HEAVY LOSSES The combined bank would have assets of about 18 trillion yen ($188 billion), putting it closer in size to rivals such as Resona Holdings (8308.T) and Sumitomo Trust and Banking (8403.T). The new bank would overtake Chuo Mitsui Trust Holdings (8309.T) as Japan's sixth-largest in terms of assets. The market value of both Shinsei and Aozora has been eroded in the last two years, due to losses on U.S. subprime mortgages and other toxic assets. In the financial year that ended in March, Shinsei lost 143 billion yen while Aozora lost 242.6 billion yen. Both banks have said they aim to focus on domestic lending after losing money on overseas investments. But analysts have said the two will face a tough slog in Japan, where the domestic loan market is controlled by local powerhouses such as Mitsubishi UFJ Financial Group (8306.T), Sumitomo Mitsui Financial Group (8316.T) and scores of regional lenders. Ratings agency Fitch Ratings said this week that a merger alone may not improve the banks' business models or immediately increase earnings power. Shinsei focuses on retail banking and consumer finance while Aozora has concentrated on corporate finance and real estate, meaning there may be little room for gaining economies of scale, Fitch said. Both Shinsei and Aozora were nationalised following Japan's banking crisis a decade ago and later sold to foreigners, who were criticised by the Japanese media for making massive windfalls on bad banks. The two banks and their American owners have been criticised for losing billions of yen on risky investments while still owing money to the government. Japan's government pumped a total of 621 billion yen into the two banks and their predecessors and is still owed more than half of that. _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
