Japan’s banks struggle again
Shinsei provides a reminder that bail-outs don’t make bad banks good.
The end of former Morgan Stanley banker Thierry Porte’s term as head of Shinsei, one of Japan’s rescued banks, and the management shake-ups at Shinsei’s peer, Aozora, have attracted a lot of attention in Japan.
When a consortium including Ripplewood and Christopher Flowers bought Shinsei in 2000, it was the first time that a Japanese bank had come under foreign control. As the bank began to articulate its strategy, focusing on a strong web presence, customer service and technological innovation, it looked as though the bank would stand as a model of what aggressive foreign management could do for struggling Japanese corporations.
Aozora too was rescued by outsiders. After an abortive attempt at becoming an investment bank, the firm was taken over by Cerberus Capital Management in 2006, and set out to be a Tokyo-based retail bank.
Now Aozora is in trouble, reporting an unprofitable first half of the fiscal year and bearing the stigma of being listed as the top unsecured creditor in Lehman Brothers’ bankruptcy filing, with $463 million in outstanding loans.
The two have struggled for mundane reasons: neither bank, since its rescue, has ever hit upon a business plan that makes sense for it.