The two will form the country’s sixth-largest
banking group with ¥18,000 billion ($187 billion) in assets, though
with just 55 branches, the new institution is still far behind the
country’s major players in terms of distribution power. Mitsubishi
UFJ Financial has around 1,200 traditional bank branches.

The deal is being portrayed and structured as
a merger of equals, though Shinsei, 32.5 percent owned by JC
Flowers, will be the dominant company.

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A spokesperson for Shinsei told RBI:
“Despite some erroneous media reports stating otherwise, the new
bank will not be called Shinsei.

“We intend to pursue a swift integration of
overlapping operations, including branch networks and enabling
functions, to reduce costs, raise profitability and better respond
to customer needs… Branding will be decided in the integration
committee, but we plan to maximise the value of existing
brands.”

Aozora - net revenues, FY2005-2008

Shinsei and Aozora currently have 2.4 million
and 0.2 million retail banking accounts, respectively.

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The spokesperson added: “In terms of retail
banking, we will continue to provide a wide range of products and
consulting services including deposits, asset management products,
mortgages, card loans, credit cards and consumer loans.

“Consumer finance will remain a key area of
expertise and the new entity will aim to transcend the traditional
boundaries of ‘bank’ and ‘non-bank’ to offer a complete range of
financial solutions for individual customers.”

Expanding the retail product range, upping the
cross-sell of both banks, and putting the emphasis on credit-led
products such as mortgages, personal loans, card loans and credit
cards all form part of the bank’s consumer strategy.

Another benefit given by the two parties is IT
expertise. Shinsei has routinely claimed to have one of the world’s
most advanced technology systems and tech-driven distribution
platforms, which, despite its relative small size, have helped it
punch far above its weight in the Japanese consumer and corporate
banking markets.

“Shinsei has built up a reputation for
outstanding customer satisfaction, as evidenced by our high
rankings in the annual Nikkei newspaper survey,” added the
spokesperson.

“In retail banking, we will look to leverage
our unique low-cost IT platform to enhance customer convenience. In
consumer finance, we will move ahead with rationalisation plans and
develop a brand strategy that focuses on responsible lending to
‘white zone’ customers [refers to the new interest rate structures
capped at 20 percent].”

It is the second major acquisition in the
Japanese market over the past 12 months, both of which have
involved Shinsei.

In July last year, the bank’s $5.4 billion
purchase of GE’s local consumer finance business propelled Shinsei
into a top-five consumer finance player. The move gave the bank 2.2
million consumer finance accounts, 1,138 consumer finance stores
and total loans outstanding of ¥884 billion ($9.5 billion).

Downbeat Japanese economy

The new bank will need all the
ammunition it can find if it is to succeed in a downbeat, shrinking
Japanese economy.

The country’s three megabanks – Mitsubishi UFJ
Financial Group (MUFG), Mizuho and Sumitomo Mitsui – posted a
collective full-year fiscal 2008 loss of $12.6 billion, while
Aozora and Shinsei announced full-year losses of $2.5 billion and
$1.49 billion respectively.

Resona, the country’s fourth-largest banking
group, posted a 59 percent fall in net income but still produced a
profit of $1.25 billion, the market’s best performance.

Promise, the country’s second-largest consumer
finance lender, reported a net loss of $1.3 billion and announced
that it was cutting its 306 staffed branches for unsecured loans to
148, converting 134 into unstaffed branches and closing the other
24.

All three of the megabanks have forecast a
return to profit in fiscal 2009. MUFG has predicted net income of
$3.1 billion for the year to March 2010; Sumitomo Mitsui net income
of $2.3 billion; and Mizuho net income of $2.1 billion – though
trading forecasts from Japanese banks are notoriously ephemeral.
But both Sumitomo Mitsui and Mizuho cited an expected reduction in
loan loss provisions as a reason for their optimism, a theory which
looks doubtful given the continued deterioration of the Japanese
economy. It contracted by a record 4 percent in the first three
months of 2009, for instance, with exports still suffering from a
historic lack of demand.

Foreign banks are running
away

In an indication of the very
difficult trading conditions, foreign banks are either halting
their Japanese plans – or running away altogether. The country
continues to confound non-Japanese banks who, despite the severe
economic backdrop of the past decade, still see Japan as an
underserved, under-competitive banking market full of opportunity
and untapped wealth.

ING Direct failed to launch a direct savings
service in the country, despite waiting 18 months for regulatory
approval, while US group Citi has retrenched significantly from its
plans to become ‘Japan’s ultimate banking and securities group’. On
1 July, in another sign of Citi’s general reorganisation of its
Japanese plans, Citi agreed to sell its shares in NikkoCiti Trust
and Banking to Nomura for $197 million.

HSBC’s is one of the few foreign groups
actively pursuing retail customers, though it is, like in nearly
all its markets, primarily pushing its mass affluent HSBC Premier
service.

At the end of May, HSBC conducted market
research into the Japanese mass affluent market, which found, among
a range of points, that two thirds of mass affluent individuals
have experienced a decline in their financial assets over the
previous 12 months.

The survey also found that, when asked to
forecast the timing for a possible Japanese economic recovery, the
most frequent opinion cited among both the mass affluent and
non-mass affluent was that it would take at least three years.

Retail banking trending
up?

Retail banking units at Japan’s major
banks largely tracked the growth rates witnessed at their parent
groups, with loan provisions and heavy losses on retail investments
proving particularly ruinous.

But there remained isolated units which bucked
the trend, including those at Shinsei and Aozora.

At Aozora, full-year retail banking net income
rose to $18 million from a small loss the year previous, while
Shinsei converted a $67 million loss into a $22 million profit over
the same period. Shinsei also benefited from a notable improvement
in retail deposits, which rose from $40.7 billion to $53.6 billion
year-on-year, an increase of some 26 percent.

Asked about market demand for retail banking
products in Japan at the moment, the spokesperson for Shinsei
added: “Our spring and summer yen time deposit campaigns offering
preferential interest rates were well-received by customers, and
contributed to continued deposit growth. As financial markets begin
to normalise, we are seeing revived interest in investment
trusts.

“Starting in July, we are launching various
campaigns on our asset management products and FX services in
response to growing demand in this area.”

RESULTS

Japan – selected banks ranked by
group assets, FY2008(1)
 

Group profit after tax
($m)

% change
year-on-year

Group assets ($bn)
FY08

FY08

FY07

MUFG

-2,700

6,580

n/m

2,052

Mizuho

-6,100

3,220

n/m

1,577

Sumitomo Mitsui

-3,920

4,760

n/m

1,235

Resona

1,280

3,130

-59

411.7

Sumitomo Trust & Banking

8

823

-99

220.3

Shinsei

-1,480

737

n/m

123.4

Aozora

-2,500

61

n/m

62.8

(1) Japanese fiscal year ends in March
Source: RBI

 

RBI
DEALWATCH

RBI DealWatch tracks
global financial services mergers and acquisitions, privatisations
and demutualisations, flotations, divestments, share stakes,
strategic alliances and joint ventures.


Country


Participants


Type/value


Description


Date


EUROPE, MIDDLE EAST, AFRICA

Austria, Central & Eastern Europe

Raiffeisen International, Raiffeisen
Zentralbank

Internal capital transfer

Raiffeisen International is to strengthen its
core capital by raising €1.25 billion ($1.78 billion) in additional
capital from its parent bank, Raiffeisen Zentralbank. The capital
increase will consist of two issuances, one of €600 million of
so-called participation rights with equity characteristics, and
another of €650 million in hybrid Tier 1 capital. Both issuances
will be fully subscribed by Raiffeisen Zentralbank.

16 Jul

Scandinavia

Sampo, Nordea

Stake increase

Finnish insurer Sampo has raised its stake in
Nordea to 18 percent. According to a report by Reuters, the Finnish
insurer has “repeatedly said it would continue to raise its stake
in Nordea but has also said it does not plan a takeover”. The
Swedish state is the biggest shareholder in Nordea, with a 19.8
percent stake.

13 Jul

Ukraine

BNP Paribas, UkrSibbank

Stake increase

BNP Paribas has raised its stake in its
Ukrainian unit UkrSibbank to 81 percent for an undisclosed amount.
BNP Paribas in December acquired 51 percent of the country’s
fourth-largest bank by assets.

13 Jul

France

Crédit Agricole, Société Générale

Asset management Joint venture

Crédit Agricole and Société Générale have
finalised the agreement to combine their asset management
operations, a deal which was initially announced in January. With
€591 billion of assets under management, the combined entity will
be ranked fourth in Europe and eighth worldwide. One of core stated
aims of the new unit is to be the leading provider of savings
solutions to the retail banking networks of Crédit Agricole and
Société Générale. With 50 million retail clients around the world,
the new entity will be an “undisputed European leader”. It is to be
called CAAM-SGAM.

9 Jul

Egypt

Actis, Commercial International Bank

Stake acquisition

Actis, an emerging markets private equity
specialist, is investing $244 million to acquire shares in
Commercial International Bank, a leading bank in Egypt. Actis is
acquiring 50 percent of the stake held by the consortium led by
Ripplewood Holdings. The transaction makes Actis the largest single
investor in CIB. Actis senior partner Paul Fletcher said: “Egypt
stands out for its excellent growth potential. Within Egypt, CIB is
the market leading bank, perfectly positioned to achieve
significant growth by extending its services into the retail
banking sector.”

7 Jul

Germany

Deutsche Post, Deutsche Bank

Stake sale

Deutsche Post has sold its entire stake in
Deutsche Bank. Deutsche Post had briefly held a stake of as much as
8 percent in Deutsche Bank as part of a deal to sell the German
retail bank Deutsche Postbank.

6 Jul

The Netherlands

ING

Internal merger

ING has announced that the now separate
organisations of Nationale-Nederlanden, RVS and ING Verzekeren
Retail (formerly Postbank Verzekeren) will be combined into one
customer-oriented insurance organisation under the
Nationale-Nederlanden brand. The new insurance organisation will
have dedicated business units for retail customers, small and
medium-sized enterprises and corporate clients. ING expects to
achieve an improved financial performance of the Dutch insurance
operations, leading to a positive P&L impact from 2010,
accumulating to €100 million before tax per year from 2013
onwards.

1 Jul

United Arab Emirates

Emirates NBD

Capital raising

Emirates NBD has concluded the issuance of
AED4 billion ($1 billion) Tier 1 debt securities. These securities
will enable the bank’s Tier 1 capital adequacy ratio to exceed 11
percent and the overall capital ratio to exceed 17 percent. The
sole investor for this issue is the Investment Corporation of
Dubai.

30 Jun

Russia

AIG, Banque PSA Finance

Unit sale

American International Group (AIG) is to sell
98 percent of its stake in consumer finance operations in Russia to
Banque PSA Finance. The buyer, owned by PSA Peugeot Citroën Group,
has the option to purchase the rest of the AIG unit in March 2011,
the New York-based insurer said in a statement. The consumer
finance business was established a year ago and currently has 12
employees.

29 Jun

Israel

Bank Hapoalim

Capital raising

Bank Hapoalim, Israel’s second-largest
banking group, has raised NIS1.5 billion ($386 million) from
institutional investors. Since the beginning of 2009, Bank Hapoalim
has raised about NIS4 billion in total. The current issue is part
of an ongoing effort by Bank Hapoalim to increase its
capital-adequacy ratios.

25 Jun

France

Caisses d’Epargne, Banques Populaires

Merger completion

Formed from the shotgun merger of Banque
Fédérale des Banques Populaires and the Caisses d’Epargne, BPCE,
France’s second-largest banking group, will become fully
operational on 3 August 2009. BPCE will rely on two autonomous and
complementary retail banking networks, those of the 17 Caisse
d’Epargne banks and the 20 Banque Populaire banks, “strictly
observing the pre-eminence of the two brands”. The new group will
have around 34 million customers, 8,200 branches, 110,000 employees
and over 7 million member-stakeholders.

24 Jun


THE AMERICAS

Columbia

AIG

Unit sale

American International Group (AIG) is selling
its consumer finance business in Colombia, the company said. Terms
of the sale were not disclosed. AIG is selling Inversora Pichincha,
a provider of consumer finance products in Colombia with 140,000
customers, 19 branches located in the main urban centres and a
distribution model that includes agreements with more than 100
automobile dealerships, 274 state entities and 1,500 companies.

2 Jul

US

Bank of America

TARP refund

Bank of America reported that its board of
directors has authorised approximately $713 million in dividend
payments to the US government under the Troubled Asset Relief
Program (TARP).

2 Jul

Regional

GE Capital Global Banking, BAC-Credomatic
GECF

Stake increase

GE Capital Global Banking has increased its
ownership stake in BAC-Credomatic GECF (BAC-Credomatic), from 49.99
percent to 75 percent, as contemplated in the original agreements
signed by the parties in 2005. BAC-Credomatic owns the retail bank
BAC International Bank and the BAC and Credomatic operations
throughout Central America. BAC Credomatic Holding will retain 25
percent of BAC-Credomatic. BAC International Bank has operations
across Central America, including Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua and Panama, with approximately $7.5
billion in assets, and $4.7 billion in deposits.

26 Jun

Mexico

AIG, Afirme Grupo Financiero

Unit sale

American International Group (AIG) is to sell
its consumer finance operations in Mexico to companies related to
Afirme Grupo Financiero and Consorcio Villacero. The New York-based
insurer will sell AIG Universal and Markcenter Services for an
undisclosed sum. AIG Universal, which offers personal loans and
third party insurance, has a network of 50 branches serving around
50,000 clients, the company said.

24 Jun


ASIA-PACIFIC

Australia

ANZ

Capital raising

In the largest retail share placement in
Australian corporate history, ANZ Bank has raised A$2.2 billion
from investors after initially seeking just A$350 million. The
offer, which was struck at $14.40 a share, tops the A$865 million
that was raised by rival Commonwealth Bank of Australia from its
shareholders last December.

9 Jul

Thailand

General Electric, Bank of Ayudhya

Consumer finance acquisition

Bank of Ayudhya (BAY) and GE Capital have
reached an in-principle agreement on the sale of GE Money’s
businesses in Thailand to BAY. If closed, the transaction would
represent an investment of THB13.75 billion ($391 million). GE
Money Thailand is the country’s largest card issuer, with over 2.2
million cards in circulation through its Central and Robinson
credit cards and joint ventures with Tesco and Bank of Ayudhya. GE
Capital holds a 33 percent stake in the bank.

9 Jul

Thailand

Industrial & Commercial Bank of China,
ACL Bank

Stake acquisition

Industrial & Commercial Bank of China
(ICBC) is in talks with the Thai government to buy a controlling
stake in Thailand’s ACL Bank. ICBC is seeking government approval
to own more than a 49 percent stake in ACL. The finance ministry
owns a 30.6 percent stake in ACL Bank and is the lender’s biggest
shareholder. Bangkok Bank, Thailand’s biggest lender, agreed to
sell its stake in ACL to ICBC, chairman Kosit Panpiemras said on 20
June. Bangkok Bank, ACL’s second-largest shareholder with a 19
percent stake, previously aimed to complete the share sale to ICBC
by the end of 2007, according to a report by Bloomberg.

3 Jul

Japan

Shinsei, Aozora

Merger

Shinsei and Aozora, two loss-making Japanese
banks both controlled by US private equity groups, have said that
they are to merge, ending months of speculation about a possible
deal. The two will form the country’s sixth-largest banking group
with ¥18 trillion in assets ($187 billion) (see main
story).

1 Jul

Japan

Citi, Nikko Citi Holdings, Nomura

Unit sale

Nikko Citi Holdings is to sell all of the
shares of NikkoCiti Trust and Banking Corporation to Nomura Trust
& Banking Co. Nomura Trust will pay an all-cash consideration
of ¥19 billion ($197.1 million). The sale is expected to close in
the fourth quarter of 2009, pending regulatory approvals and other
closing conditions.

1 Jul

Indonesia, global

State Bank of India, Bank Eksekutif

Merger plans, international expansion

State Bank of India (SBI) is in talks with
Indonesia-based Bank Eksekutif to acquire a majority stake. Bank
Eksekutif is one of the relatively smaller Indonesian banks, with a
market capitalisation of $6.66 million and just 13 branches. In a
separate announcement, SBI has said it is looking at expanding its
international footprint across the world. SBI is looking at buying
a mid-sized overseas bank, and the deal size could be between $1.5
to $2 billion, according to a senior bank official.

30 Jun

India

HSBC, Investsmart

Stake acquisition

HSBC is to make an offer to acquire all
minority shareholders’ interest in IL&FS Investsmart. HSBC
intends to make an offer to acquire from minority shareholders the
remaining 6.14 percent of Investsmart it does not currently own.
During 2008, HSBC acquired 93.86 percent of IL&FS Investsmart
through various subsidiaries for a total consideration of INR14
billion. IL&FS Investsmart Group (IIL) is one of India’s
leading financial services organisations, and provides a wide range
of investment products to over 160,000 customers in India through
77 branches and 153 franchisee outlets.

16 Jun

Source: RBI