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In the corridors of Tokyo’s financial districts, they’re calling it a year to forget.

The country’s biggest brokerage took a ¥311 billion ($2.7 billion) hit after Bill Hwang’s family office blew up. One of its three giant banking groups said its chief executive officer was stepping down over systems failures. And another securities firm is being investigated for alleged market manipulation.

Into this sorry year came an iconoclast, vowing to shake up the industry with the first ever hostile takeover of a Japanese lender.

Yoshitaka Kitao, a former Nomura Holdings Inc. banker who now runs financial services group SBI Holdings Inc., has already reimagined stockbroking and brought new ideas to the ailing regional banking sector. By taking effective control of Shinsei Bank Ltd., he’s setting his sights on creating a banking alliance to rival the conservative old guard.

“We have to change” Japanese finance, the 70-year-old Kitao, who sleeps about four hours a night, said in an interview. “I’ve always tried to reform old ways of doing things.”

SBI’s Shinsei stake purchase suggests high-ranking government support for Kitao’s new approach in an industry that has long struggled with low profitability at home, difficulties with technology and challenges succeeding in overseas markets. Japanese financial regulators view Kitao as a welcome agent of change in regional banking, according to two people familiar with their thinking, who asked not to be identified discussing private information.

The takeover, which Shinsei stopped opposing at the eleventh hour, comes as some of the biggest names in Japanese finance continue to experience problems linked to those legacy issues.

Nomura’s huge losses relating to a U.S. client, which Bloomberg identified to be Hwang’s Archegos Capital Management, followed years of efforts to sharpen its focus overseas in businesses it believed it was good at, said S&P Global Ratings analyst Toshihiro Matsuo.

Like several other firms, it took risks on the highly leveraged Hwang — which went badly wrong. After the losses, Nomura moved to improve risk management, suspended senior executives and stopped offering cash prime-brokerage services in the U.S. and Europe.

Nomura “stumbled on its own,” according to Kitao, who said he was once in the running to lead the brokerage before quitting to become chief financial officer of Masayoshi Son’s SoftBank Group Corp. After about seven years as part of SoftBank, in 2006, SBI branched out on its own. Since then, Kitao has built SBI into a vast empire, and is unashamedly proud of what he’s achieved.

Nomura didn’t immediately respond to a request for comment.

The technical troubles that took down Mizuho Financial Group Inc. CEO Tatsufumi Sakai trace as far back as the early years of this century, after the group was formed through the merger of three lenders. Sakai will step down from April to take responsibility for the latest series of glitches, which included ATMs swallowing more than 5,000 cash cards and passbooks and prompted the Financial Services Agency —the financial regulator — to issue an order to shape up.

“It’s been a tough year” for the industry, said Hideyasu Ban, an analyst at Jefferies Financial Group Inc. in Tokyo.

Even groups that escaped such issues face their own challenges. An index of 81 Japanese lenders is down more than 30% since early 2018 and trades at less than half book value. Mitsubishi UFJ Financial Group Inc., the No. 1 megabank that forecast record annual profit last month, has seen its shares slump in the period.

Kitao, who in his college years rejected overtures from recruiters for Mitsubishi Bank, a predecessor of MUFG’s lending unit, is seen as brash and abrasive by some in the industry, but he can claim a record of spurring change in Japan.

In just a few years he built SBI into the country’s leading online brokerage, winning customers by offering low commissions and easy-to-use technology. SBI now has about 7.7 million client accounts across Japan, according to the company.

More recently, Kitao has been seeking to revive the country’s ailing regional lenders, which have been pummeled by low interest rates and the hollowing out of rural Japan.

SBI has formed capital and business alliances with eight such banks since 2019, helping them with technology and letting them tap products ranging from insurance to trading services for stocks and mutual funds. Shimane Bank Ltd., the first such lender, said the collaboration helped its recovery. Fukushima Bank Ltd., the second, saw core income more than double in the six months ended September.

“His move has made waves,” said Shin Tamura, a banking analyst at Bloomberg Intelligence. “It may have produced a sense of urgency among small banks.”

Kitao’s work with regional lenders may also have helped push through his bid for Shinsei, the medium-sized bank that still hasn’t repaid public funds from a bailout more than two decades ago. The government, which owned more than a fifth of Shinsei as a result, could have voted to support the lender’s poison pill, scuppering the share purchase. But shortly after reports emerged that it wouldn’t do so, Shinsei withdrew the takeover defense.

If the reports are correct, “Kitao-san of SBI certainly has high-ranking friends in the FSA who are frustrated with the status quo and would like to see SBI shake up the regional banking industry using Shinsei Bank as the vehicle,” said Jamie Rosenwald, a co-founder and portfolio manager at Dalton Investments, a $3.4 billion U.S. money manager that holds shares in Shinsei.

SBI, which said Saturday its tender offer for Shinsei had given it an almost 48% shareholding in the lender, is considering boosting that to a majority stake. It plans to make Shinsei the core bank within its group, but also position it as a platform for regional lenders.

The second aspect is “more interesting,” said Michael Makdad, an analyst at Morningstar Inc. in Tokyo. Shinsei could act as a central organization for the regional banks, helping them perform operations such as investing in foreign assets that they’re unable to do on their own, he said.

Time will tell how much that will help SBI to rival the three giant banking groups. Even Kitao has acknowledged he had one eye on grabbing media attention when he unveiled the “fourth megabank” slogan.

But for Hironari Nozaki, a Toyo University professor and former banking analyst, the three incumbents can learn from the maverick financier. “Kitao was one of the first movers toward technological innovation in the financial space,” he said. “Traditional players should learn from his foresight.”

Still, some people in the industry have their reservations.

Financial authorities, while pleased with his interventions in regional banking, still have doubts about whether Kitao can keep a tight grip on his sprawling business empire, according to a senior regulator who asked to remain anonymous discussing private information. The regulator issued a business suspension order to SBI’s social lending business in June, finding that it gave false explanations to investors about how their money would be spent. SBI had already said the previous month that it had decided to close the business.

And traditional players may find his business approach, as seen at the start of the Shinsei battle, a little scary, according to Toyo University’s Nozaki. He’s also unlikely to have many opportunities to hear opposition to his thinking, he said.

But after a difficult year for Japanese finance, some observers, at least, say that Kitao’s Shinsei move may lead to the shake-up that he predicts.

“SBI could be a threat to the megabanks,” said Rie Nishihara, a senior bank analyst at JPMorgan Chase & Co. in Tokyo. “It’s going to be a big change for the industry. In 2022, it’s going to be a breath of fresh air.”

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