Reviving the bank falls to Shinsei Chief Executive Officer and Chairman Masamoto Yashiro, a former Citibank Japan chief who is highly regarded in banking circles. Yashiro discussed his strategy and the challenges ahead with BusinessWeek Asian Economic Editor Brian Bremner. Following are edited excerpts of the interview:Q: The old LTCB was primarily known as an industrial lender, not a retail franchise. How is the transformation going?A: Retail banking wasn't a business we had in the full sense of the term until the bank was transformed into what it is today. In addition to traditional debenture products, we wanted to expand the scope of products and improve dramatically the efficiency of distribution. We're moving toward foreign-exchange deposit products, mutual funds, and maybe even life-insurance products, depending on the regulatory climate. The scope will be as wide as anyone can think of in this country or elsewhere. We want to sell whatever consumers want.Q: But Japanese savers are fabled for their conservatism. Do you think they will warm up to your financial products?A: These days, when you have a 1 million yen time deposit for one year, you get 320 yen after tax. That's not enough to take a bus from your home and back from the branch. Ten years ago, Japanese consumers viewed those foreign-currency time deposits as risky. But if they know they can buy and sell anytime -- it's not a pure deposit product, it's more of an investment product.Q: You recently launched Shinsei Securities. Thinking about diving into the world of brokering?A: We have no interest in retail brokering. We're buying loan products and mortgage loans. These can be sold in the securitization process. In the past, we had to rely on somebody else. Now, we do it ourselves. We have a variety of products, such as merger-and-acquisition advice for middle-sized companies. As the economy continues to have problems, companies need to restructure. We do a large amount of loan securitization. We have done very well. We're going to achieve our goal of 30% of our revenues from fees and commissions probably this year.Q: How does a bank lend profitably in the land of zero interest rates?A: The Japanese interest rate structure is such that no one can make money today. If you look at the historical default rate, a bank will never make money under today's environment. We need to sell products and services that bring in commissions without using our balance sheet.Q: Japanese banks are laggards on the information-technology front. How is Shinsei doing?A: LTCB had information and accounting systems that were completely separate. It was the kind of system that U.S. banks had 20 years ago. We decided to change this system to the newest, most efficient, and cheapest one out there. We went with a system called Flex Cube, and we had 50 people from India under contract to make it work. We finished the entire conversion in 10 months.
Before, the bank didn't have a monthly profit-and-loss statement. We have started allocating all the expenses to each of the business segments and products. Today, we have profit-and-loss statements for every business group and product. Each of our business groups now has a bottom line. How could you really put your resources into many areas without knowing how you're doing on a month-to-month basis?
The important thing is the spread, not the absolute amount of expenses. I wanted to have this information given to the lowest level of employees.