OSAKA -- Senshu Bank, an ailing regional bank based in Kishiwada, Osaka Prefecture, said Thursday that it will become a subsidiary of Sanwa Bank, a major commercial bank.
The announcement follows an order issued to the bank by the Financial Services Agency, which has ordered it to take prompt corrective action to restore its depleted capital base.
Sanwa Bank, which already holds a 32.6 percent stake in Senshu, will put the troubled bank under its control by raising its stake to 65 percent.
Senshu Bank will reduce its capital by 28 billion yen in December and then lift it by 65 billion yen by issuing new shares through a third-party allotment to Sanwa Bank by the end of January.
"By boosting capital injection and carrying out restructuring plans, we believe we can bring our capital-asset ratio to 8 percent by next March," Senshu Bank President Kenji Yanagiso told a news conference here.
With the amount of nonperforming loans it must dispose of, the regional bank has changed its consolidated business forecast for the April-September period from a 200 million yen net profit to a 43.2 billion yen net loss.
The bank will also cut its payroll from 1,200 to 1,080 and close 10 of its 66 branches.
Sanwa Bank made Senshu Bank an affiliate in April, buying 20 billion yen in new shares and providing 25 billion yen in subordinated loans for the bank.
The capital injection lifted Senshu's capital-to-asset ratio above 8 percent from 5.13 percent at the end of March.
But Senshu Bank needs a further capital increase because it will dispose of tens of billions of yen in nonperforming loans for the April-September period.