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Wednesday May 14, 9:03 PM
Struggling Shinsei turns to "visionary" chief, 79By David Dolan
TOKYO, May 14 (Reuters) - Japan's struggling Shinsei Bank will once again turn to clean-up man Masamoto Yashiro, bringing back the 79-year-old former chief executive who famously transformed a bankruptcy into a Western-style bank. Shinsei, hurt by heavy subprime losses and a weak consumer finance business, said on Wednesday the former Citibank executive will return as non-executive chairman next month.
The appointment comes at a critical time for the lender. Shinsei lost 29 billion yen ($280 million) on soured subprime bets in the year to March 2008, and was forced to sell its headquarters to meet regulatory targets. Its retail business, once hailed as revolutionary, is no longer profitable, in part because competitors started borrowing from Yashiro's script. Shinsei, nearly a third owned by buyout firm JC Flowers & Co, on Wednesday reported a return to annual profit, booking a group net profit of 60.1 billion yen, yet forecast little growth in the year ahead. The bank lost about 61 billion yen a year earlier. "Frankly it was a disappointing year," President and Chief Executive Officer Thierry Porte told a news briefing on Wednesday. Porte, who hailed Yashiro as a "visionary leader" and "the youngest 79-year-old I've ever met", said the incoming chairman would advise the lender as it looks to return its retail operation to profitability, and strengthen its consumer finance business. SHARP CRITICISM Shinsei still owes the government more than 200 billion yen from a public bailout in the 1990s, and frequently draws sharp criticism from Japanese media claiming the bank and its American head are wasting taxpayers' money. In the past year, Shinsei was forced to cut its estimates for recurring profit four times and net profit three times as the credit crisis widened. However, Porte said he expects no more subprime losses in the year to March 2009. The share price fell 42 percent in the 12 months to March 2008, but has since recouped about half of the loss. The earnings downturn forced the bank to sell its Tokyo office to U.S. investment bank Morgan Stanley , with the 56 billion yen profit from the deal allowing Shinsei to meet regulatory targets. Shinsei and other banks that still owe the government money must provide the regulatory Financial Services Agency with business plans, including earnings targets. If a bank misses those targets by more than 30 percent for two straight years it can be forced to make changes, including replacing its president, the FSA said. After missing its last target, Shinsei needed a net profit of at least 42 billion yen on a parent basis in the year to March 2008 to avoid regulatory action. The sale to Morgan Stanley helped it post a net profit of 53.2 billion yen at the parent level, beating its target and allowing Porte -- the former head of Morgan Stanley in Japan -- to avoid a potential firing. Shinsei was born out of one of the most profitable buyout deals in history, when J.C. Flowers head Christopher Flowers teamed up with private equity firm Ripplewood to buy Shinsei's predecessor in 2000. At the height of Japan's banking crisis they paid $1.2 billion for failed lender Long-Term Credit Bank of Japan, renamed it Shinsei, which means "new life", and took it public in 2004. The deal, recounted in the book "Saving the Sun", earned its initial backers more than several times their initial investment and made Yashiro one of the world's best-known Japanese execs. Shares of Shinsei finished up 3.5 percent at 446 yen before earnings were released, outperforming a 0.2 percent decline in Tokyo's index of bank stocks (Editing by David Hulmes)
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