Shinsei Bank and Aozora Bank said Wednesday they have reached an agreement to merge in October next year to create Japan’s sixth-largest banking group with total assets of over ¥18 trillion.
The two loss-making lenders largely owned by U.S. private equity investors set the merger ratio at 1-to-1, with Shinsei to be the remaining company. The new bank will have Norito Ikeda, 61, former president of Ashikaga Bank, as its first president, they said.
The two banks have suffered huge losses amid the global financial crisis and aim to restore their financial health and turn around their business through the merger.
Having incurred large losses in the year that ended March 31 due mainly to troubled investments overseas, the two lenders said the new bank will focus more on domestic corporate financing operations. They also intend to improve profitability through the consolidation of systems and cost-saving measures.
Ikeda said in Tokyo the new bank will focus on domestic operations.
“I believe it is fully possible to create a bank that customers want by positively combining the two banks’ characteristics,” said Ikeda, who just agreed Tuesday to take the post.
The new bank’s name will be decided by an integration committee the two banks will set up. The committee will be cochaired by Shinsei President Masamoto Yashiro and Aozora President Brian Prince, and Ikeda will also become a member.
With Shinsei becoming the surviving entity, Aozora will be delisted from the Tokyo Stock Exchange’s first section at a yet-to-be-decided date.
Shinsei Bank was created from the ashes of Long-Term Credit Bank of Japan, which failed in 1998 during Japan’s banking crisis, and Aozora’s predecessor, Nippon Credit Bank, also went bankrupt at that time. The two lenders were bailed out by the government and once again brought largely under private ownership in 2000.
Shinsei is now largely owned by J.C. Flowers & Co., while Cerberus Capital Management L.P. is a principal shareholder in Aozora.
Still, the two banks have yet to pay back a total of ¥400 billion in public funds.
Ikeda said the new bank may apply for additional funds if necessary.
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