Softbank Corp. may sell part of its stake in Aozora Bank, raising the possibility of a tussle should a leading stake fall into foreign hands, Aozora Bank President Hiroshi Maruyama said Wednesday.
“It is exceedingly sad,” Maruyama said. “(Talks of the sale) have created uncertainty among customers, and are not a plus to the bank.
“There was an unspoken understanding (between the government and the industry) that domestic forces would dominate in Aozora, since Shinsei Bank was going to foreign hands,” he said at a news conference held to report the bank’s earnings results for fiscal 2001, indicating his disapproval of foreign investors buying out Softbank’s stake.
Maruyama also expressed concerns over private equity funds that invest over the short-term and sell at an early opportunity to take profits.
“They are not welcome,” he said, adding that a stakeholder who shares Aozora’s business vision is preferable.
Part of that vision is to grow its retail banking operations and offer more advisory services.
Softbank is reportedly in negotiations with at least three companies, at least one of which is thought to be foreign. However, nothing definite has been decided yet, Maruyama said.
Softbank, Orix Corp. and Tokio Marine & Fire Insurance Co. jointly acquired the then government-owned Nippon Credit Bank in September 2000. Softbank bought a 48.87 percent stake, Orix bought 14.99 percent, and Tokio Marine & Fire bought 14.99 percent. Nippon Credit Bank was renamed Aozora Bank in January 2001.
For fiscal 2001, Aozora reported 25.9 billion yen in profits from core operations, up 54.3 percent from a year earlier, and a net profit of 18.56 billion yen, down 81.3 percent.
The bank’s outstanding bad loans stood at 489.6 billion yen, about 14.2 percent of all loans. The bank hopes to reduce this figure to about 5 percent of loans by the end of the current fiscal year, and projects operating profits to grow 23 percent to 32 billion yen.
“We worked hard,” Maruyama said of the bank’s success in securing more new loans and raising operating profits. “We do not have to worry about the bad-loan problems other banks have, and can concentrate on more forward-looking actions.”
Outstanding loans stood at 3.3 trillion yen at the end of the fiscal year, up 6.8 percent.
To date, the Deposit Insurance Corp. has bought 49 bad loans worth 144.5 billion yen from Aozora at a cost of 106.8 billion yen. Aozora estimates it may sell half of the 300 billion yen in bad loans it believes it might write off this year to the DIC.
Under a contract between the government and Aozora and Shinsei, the two banks can ask the DIC to buy loans whose values fall sharply as a result of bankruptcies or financial problems among relevant borrowers.
Shinsei Bank, the reborn entity of the Long-Term Credit Bank of Japan, made a fresh start under its new name in June 2000 after being sold to U.S. investment firm Ripplewood Holdings LLC.
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