ID :
12266
Fri, 07/11/2008 - 22:31
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https://oananews.org//node/12266
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Shinsei Bank to buy consumer finance arm from GE
TOKYO, July 11 Kyodo - Shinsei Bank said Friday it will acquire a Tokyo-based financial arm of General Electric Co. of the United States for 580 billion yen to beef up its hard-hit consumer finance operations.
GE Consumer Finance Co., a midsize consumer loan company, operates the Lake brand consumer finance business as well as credit card and mortgage businesses.
''This marks our largest acquisition to date and is the biggest step we have taken toward our goal of redefining and modernizing consumer finance in Japan,'' Shinsei President Thierry Porte said at a press conference.
By acquiring Lake, Shinsei Bank hopes to enlarge and boost the profitability of its consumer finance business, which has slumped heavily after the Supreme Court ruled in January 2006 to effectively invalidate excessive interest charged under the so-called ''gray zone'' rates.
Including Shinsei's affiliates such as Aplus Co. and Shinki Co., earnings at Japanese consumer loan companies have tumbled as tighter regulations caused a surge in demand from debtors for the reimbursement of the excessive interest charges.
But Porte brushed aside skepticism that the large-scale acquisition may be too risky at a time when the entire Japanese consumer finance industry is struggling to survive.
''Certainly there is no doubt that the industry has faced quite a difficulty but the fact remains in our view that this is a service that is needed by customers,'' Porte said, adding he was ''absolutely confident'' about the acquisition price.
But the bank refused to disclose details on how much ''positive financial impact'' will be reflected on its earnings for fiscal 2008 through next March.
The Shinsei chief emphasized that the agreement with GE requires the U.S. firm to cover any additional losses incurred as a result of tighter regulations on the ''gray zone rates'' above 260 billion yen.
The bank estimates that its maximum ''gray zone'' costs would be about 203 billion yen, which it would cover independently. Shinsei and GE will share potential losses from 203 billion yen to 260 billion yen.
''What we are doing here is acquiring a high-quality platform with excellent employees and a strong position in the market,'' Porte said. ''At the same time, we have come up with an arrangement that eliminates the gray zone risks.''Porte also added that the bank has no intention to carry out job cuts or to consolidate its numerous affiliates with GE Consumer Finance.
Shinsei Bank, which is about one-third owned by U.S. investment firm J.C. Flowers & Co., managed to return to profitability for the year to March 2008 mainly through a one-off profit from the selling of its head office building.
Meanwhile, GE Consumer Finance logged a net loss of 120.5 billion yen during the 12 months to December 2007. Its consumer finance brand Lake had 1,138 branches nationwide and 884 billion yen in outstanding loans, as of Dec. 31, 2007.
The U.S. firm invited bids last November and March to sell Lake and has been negotiating with Shinsei Bank as well as other bidders including major Japanese consumer loan firms Promise Co. and Acom Co.
GE Consumer Finance Co., a midsize consumer loan company, operates the Lake brand consumer finance business as well as credit card and mortgage businesses.
''This marks our largest acquisition to date and is the biggest step we have taken toward our goal of redefining and modernizing consumer finance in Japan,'' Shinsei President Thierry Porte said at a press conference.
By acquiring Lake, Shinsei Bank hopes to enlarge and boost the profitability of its consumer finance business, which has slumped heavily after the Supreme Court ruled in January 2006 to effectively invalidate excessive interest charged under the so-called ''gray zone'' rates.
Including Shinsei's affiliates such as Aplus Co. and Shinki Co., earnings at Japanese consumer loan companies have tumbled as tighter regulations caused a surge in demand from debtors for the reimbursement of the excessive interest charges.
But Porte brushed aside skepticism that the large-scale acquisition may be too risky at a time when the entire Japanese consumer finance industry is struggling to survive.
''Certainly there is no doubt that the industry has faced quite a difficulty but the fact remains in our view that this is a service that is needed by customers,'' Porte said, adding he was ''absolutely confident'' about the acquisition price.
But the bank refused to disclose details on how much ''positive financial impact'' will be reflected on its earnings for fiscal 2008 through next March.
The Shinsei chief emphasized that the agreement with GE requires the U.S. firm to cover any additional losses incurred as a result of tighter regulations on the ''gray zone rates'' above 260 billion yen.
The bank estimates that its maximum ''gray zone'' costs would be about 203 billion yen, which it would cover independently. Shinsei and GE will share potential losses from 203 billion yen to 260 billion yen.
''What we are doing here is acquiring a high-quality platform with excellent employees and a strong position in the market,'' Porte said. ''At the same time, we have come up with an arrangement that eliminates the gray zone risks.''Porte also added that the bank has no intention to carry out job cuts or to consolidate its numerous affiliates with GE Consumer Finance.
Shinsei Bank, which is about one-third owned by U.S. investment firm J.C. Flowers & Co., managed to return to profitability for the year to March 2008 mainly through a one-off profit from the selling of its head office building.
Meanwhile, GE Consumer Finance logged a net loss of 120.5 billion yen during the 12 months to December 2007. Its consumer finance brand Lake had 1,138 branches nationwide and 884 billion yen in outstanding loans, as of Dec. 31, 2007.
The U.S. firm invited bids last November and March to sell Lake and has been negotiating with Shinsei Bank as well as other bidders including major Japanese consumer loan firms Promise Co. and Acom Co.
