Credit Saison to maintain independence

by Finbarr Flynn and Takako Taniguchi

Bloomberg

Credit card firm Credit Saison Co., 14.3 percent owned by Mizuho Financial Group Inc., will remain independent of the bank as its rivals join up with the country’s biggest lenders.

“It’s a matter of keeping management independence,” Chief Executive Officer Hiroshi Rinno said in an interview Monday. Credit Saison wants to keep Mizuho below the 15 percent threshold, he said. Having 15 percent voting rights would make the company a Mizuho affiliate.

Credit card companies have struggled to make profits since 2006, when they were forced to repay customers billions of yen in overcharged interest.

Credit Saison aims to keep control while Japan’s two largest banks, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc., increase their investments in the industry.

“Credit Saison is issuing all of Mizuho’s credit cards, while not losing its independence and that’s not bad,” said Azuma Ohno, a Tokyo-based analyst at Credit Suisse Group AG.

Rinno, 67, said Credit Saison may miss its ¥33 billion target for ordinary profit — income before one-time items — by more than ¥1 billion. The forecast, which doesn’t include Credit Saison subsidiaries, won’t be met because customer claims for interest repayments are rising, he said.

Credit Saison posted a net loss of ¥55.5 billion last fiscal year after booking charges on real estate investments. That compares with a profit of ¥26.8 billion a year earlier.

Mizuho and Credit Saison in December 2004 formed a credit card alliance and made an agreement to keep the bank’s stake below 15 percent. Mizuho held 7.4 percent of Credit Saison as of March that year, according to a regulatory filing, and reached its current holdings July 30.

Mizuho isn’t planning to raise its stake in Credit Saison above the agreed threshold, said Masako Shiono, a Tokyo-based spokeswoman for the company.

Japan’s largest banks are “poor” at serving retail customers and there would be little positive impact from allying more closely with one, Rinno said.

Credit Saison had 27.8 million cardholders at the end of June, half of whom were active users, according to the company’s financial statements.

Banks are targeting the credit card market to boost profit from consumers and to reduce their reliance on corporate lending. Mitsubishi UFJ increased its stake in credit card unit Mitsubishi UFJ Nicos Co. in 2008, making the company a wholly owned subsidiary.

Sumitomo Mitsui has invested more than ¥90 billion to buy stakes in credit card companies since 2007, including 51 percent of Orix Corp.’s credit-card unit in July.

OMC Card Inc., Central Finance Co. and Quoq Inc., three consumer credit affiliates of Sumitomo Mitsui, merged to form Cedyna Financial Group Inc. on April 1.

“If Mizuho tried to raise its Credit Saison ownership above 15 percent, that would be a positive for the card issuer,” Ohno said. “Having a bank to back it up would support Credit Saison’s credit worthiness.”