Posted by: Ian Rowley on November 12, 2008
For the most part, Japan’s biggest banks are proving reasonably resilient during the current financial crisis. There have been no bailouts and the biggest of them all, Mitsubishi UFJ, has even splashed $9 billion for a 21% stake in Morgan Stanley.
Moves in Tokyo today, though, suggest Shinsei, which was famously formed from the ashes of Long Term Credit Bank at the turn of the century, is doing less well. Shinsei is replacing its American CEO Thierry Porte, a former Morgan Stanley Japan chief and Harvard MBA, with his predecessor Masamoto Yashiro.
It’s an interesting move. Yashiro was Shinsei’s first CEO from 2000 to 2005, then becoming chairman and later an adviser. In June, he returned as chairman once more and now, at 79, is back in the hot seat. Sources close to Shinsei say that the decison was Porte’s and sudden, which may explain why Yashiro, who also steered Citibank’s Japan ops in the past, is coming back to steady the ship.
Yashiro gave an interesting interview in Japan on October 14 in which he blamed an excessive focus on investment banking on the current financial crises. Today, Shinsei also announced that in the six months through Sept. 30, it had lost $195 million compared to a projected loss of $150 million. The bank said net credit losses of $425 million. It blamed poor performance in its principal investment and securitization businesses which “under-performed as a result of the bankruptcy of Lehman Brothers as well as losses related to asset-backed investments and to other investments in Europe.” Nevertheless, the move seems abrupt. Only in April, Shinsei pulled off a $5.4 billion deal to buy GE’s Japanese consumer finance business.
Porte may not be the only foreign bank CEO in Japan to be feeling the heat. Two other banks, Aozora, which has private equity firm Cerberus as its biggest shareholder, and Tokyo Star Bank, another institution that was reborn with a help from private equity, have also been making headlines for the wrong reasons of late.
In October, lender Aozora which is led by former Bank of America exec Frederico Sacasa, cut its profit forecast by 79% to $108 million for the six months through September after running up losses investing in General Motors’ finance unit GMAC. GMAC is 51% owned by Cerberus. Aozora was also a lender to Lehman. After the U.S. firm collapsed it was listed in the U.S bank’s bankruptcy filing as its biggest Japanese creditor in Japan with $463 million in loans (Shinsei had $363 million).
At Tokyo Star, meanwhile, American CEO and former missionary Todd Budge has had to contend with its Osaka branch losing the personal information of almost 20,000 customers last month and yesterday filed a lawsuit against Mitsubishi UFJ in a row over the shared use of its ATMs.