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Tuesday, Nov. 3, 2009
Lehman-stung Shinsei refocusing on Japan
Having experienced a record loss on overseas investments and loans to Lehman Brothers Holdings Inc., an executive of Shinsei Bank Ltd. said the nation's seventh-largest bank will now focus on corporate and individual customers at home instead of proprietary investments abroad.
"Given the lessons that we learned from the global financial turmoil, we have acted proactively and swiftly in remodeling Shinsei Bank," Rahul Gupta, senior managing executive officer and chief financial officer at the Tokyo-based bank, told The Japan Times during a recent interview.
Last business year, Shinsei logged a consolidated net loss of ¥143 billion for the year, compared with a net profit of ¥60.1 billion the year before.
The lender cited losses of ¥50.7 billion in the fourth quarter of fiscal 2008 related to impairment of a collateralized loan obligation portfolio. The bank took charges of ¥29.4 billion related to the bankruptcy of Lehman Brothers during the same fiscal year.
Following the financial crisis, Gupta said the bank is focused on a back-to-basics strategy, prioritizing lending to corporate and individual customers in Japan that include small and medium-size enterprises, the public sector and financial institutions.
In the three months that ended in June, Shinsei returned to a net profit of ¥5.1 billion after three straight quarterly losses. Gupta maintained the bank's forecast for a ¥10 billion net profit this fiscal year.
"We are looking forward to ending the year on a positive note," said Gupta, who last summer also became a member of the bank's board of directors — the first Indian ever to hold such a position at a Japanese bank.
Shinsei plans to merge with Aozora Bank Ltd. by next October to create Japan's sixth-largest banking group on a total assets basis.
"It is an interesting combination of two midsize lenders," Gupta said. "By strategically transforming ourselves into the sixth-largest bank in Japan, we can play a very important role on the Japanese banking landscape."
He said corporate lending and financial services for individuals are two areas where the new banking group will be able to play a key role.
A graduate of the University of Delhi, Gupta started his banking career in India in 1983. Earning his master's of business administration from the University of Bombay, he has worked for Indian, French, British, Singaporean, German and Japanese banks.
"Banking has changed in many ways, and over the course of 25 years I have seen a number of business cycles," Gupta said. "But I think the key to success is a focus on the customer and good execution."
By further improving Shinsei's profitability, Gupta said the bank aims to complete repayment of its public funds to the government in the mid-term. As of now, the bank owes around ¥216.9 billion.
Gupta said the priority is to focus on profitability so the bank has sufficient retained profits to pay back taxpayers' money.
However, Gupta said paying off all the public funds will take some time.