UFJ Bank Ltd. said Friday that it will acquire consumer credit firm Nippon Shinpan Co. as part of an ongoing effort to expand its retail banking business.

Japan's fourth-largest lender said it is aiming to claim pole position in the domestic credit card business by having the country's fourth-largest credit card issuer operate under its wing.

Under the plan, Nippon Shinpan will become a subsidiary of UFJ Bank around March 2005.

UFJ President Masashi Teranishi explained that the move is designed to bolster the bank's efforts to expand its retail business, saying Nippon Shinpan will be positioned as a core entity within the UFJ group's retail division.

"Our priority is to make retail baking the core of our business. The alliance with Nippon Shinpan is the second in a series of actions for that purpose," he said.

The bank's 24-hour ATM service was the first maneuver in this process.

UFJ has its own credit cards, but Teranishi said it may integrate its card business with that of the newly acquired subsidiary.

Nippon Shinpan, known for its Nicos brand credit cards, boasts 14.52 million card holders.

It will issue preferred shares to UFJ in March next year.

While the number of shares and their value have yet to be determined, when converted, they will give the bank a majority stake in the firm.

UFJ is already Nippon Shinpan's largest shareholder, with a 7.69 percent stake.

While the two companies tried to paint the deal as "strategic alliance," industry observers view it as yet another case of a struggling firm being bailed out by its main lender.

Current Nippon Shinpan President Kazuhiro Omori assumed his position a year ago, when his predecessor, Yoji Yamada, the eldest son of the founder, stepped down to take responsibility for illegal payoffs made by the firm to corporate racketeers.

The company has been under pressure to bolster its depleted capital, having seen its revenue shrink amid fierce competition and growing loan-loss provisions.

Earlier this month, the company said it is likely to post a 48 billion yen net loss for the full year through March, well down from the initially forecast net profit of 6 billion yen, after it decided to write down the value of its assets.