Apparently Kitao is fully on board for the NCB deal. That is somewhat encouraging. Has anyone seen his book yet?
I am beginning to feel that the potential negative of the split shares suddenly becoming available later this month is going to be a non event in the face of all these other developments coming to fruition. The only part of Son's vision that has been delayed is the Speednet wireless ISP and I hope they can get that sorted out pretty soon. I guess there is also the Softbank 44 million shares of UTStarcom that is currently down, but I hope that is temporary too. All in all, we seem to be moving in the right direction albeit somewhat more deliberately than in the past.
Softbank Purchase of Nippon Credit Bank Marks Shift (Update3)
By Jason Singer
Tokyo, June 6 (Bloomberg) -- Softbank Corp.'s agreement to buy Nippon Credit Bank Ltd. from the Japanese government is a move that clashes with its vow of only investing in Internet companies. Yet it may pay off, analysts said.
Softbank and two partners, leasing firm Orix Corp. and insurer Tokio Marine & Fire Insurance Co., reached a basic agreement with the Japanese government to pay 101 billion yen ($940 million) for Nippon Credit, a bank that failed in 1998 under at least 95 billion yen of bad debts.
The Softbank group will provide 80 percent of the money -- 1 billion yen to the Deposit Insurance Corp. of Japan and 100 billion yen to purchase 333.3 million Nippon Credit shares --with 20 percent coming from foreign and regional Japanese lenders, the government said in a statement.
Now, Softbank has to work a 43-year-old failed bank into its Internet-only strategy.
``What Softbank wants to do is to transform the bank into a sort of venture capital (firm) to invest into Internet-related companies,'' said Motoharu Sone, an analyst with Tsubasa Securities Co. ``In this sense, the NCB purchase is still barely within the range of Softbank's strategy to focus on Internet operations.''
It's one of Softbank's biggest gambles yet.
Masayoshi Son, the firm's billionaire chairman, said two weeks ago that he wanted to shed non-Internet investments and ``become a pure Internet company.'' The firm's second-half net income fell 65 percent as it lost money on sales of stakes in non- Internet related units.
Commitment
The Softbank group won the bidding for Nippon Credit -- six days after its period of exclusive talks ran out -- based in part on its resolve to expand into banking, said Asahiko Isobe, a member of the government committee arranging the sale.
``They showed their will to start a banking business,'' said Isobe, who is also president of a research institute at Hitachi Ltd.
Sadakazu Tanigaki, chairman of the Financial Reconstruction Commission, the industry regulator, said the Softbank group was selected as much for its innovative business practices as its commitment to banking.
``We were attracted to the capability the Softbank group has,'' he said. ``They are doing ventures we have never seen before. And some of their companies are traditional. They have credibility. The new bank may create a new era. That's what we expect.''
To gain the banking experience that it lacks, the group plans to ask Lehman Brothers Holdings Inc., Chase Manhattan Corp. and UBS AG to invest a total of about 20 billion yen, a government official said. UBS declined to comment. The others were unavailable.
The plan to use Nippon Credit to finance Softbank's Internet startups will provide cash for its sprawling range of electronic businesses, analysts said.
Softbank will also be able to sell a larger variety of financial products over the web, linking with its other related companies, like E*Trade Group Inc.
`Zaibatsu'
The bank license alone would be another step towards its so- called ``online financial services mall.'' The company, which already has securities trading, insurance and leasing operations, in January agreed to start an online settlement service with Suruga Bank Ltd., a regional Japanese bank.
``Softbank now has a new way to raise funds,'' said Kota Nakako, an Internet analyst at UBS Warburg LLC, who upgraded his stock recommendation to ``buy'' last Friday. ``Buying NCB could be one method for Softbank to collect the capital needed to build an Internet zaibatsu,'' he said, referring to the term used for Japanese conglomerates before they were broken up after World War II.
Buying a bank isn't necessarily a stretch for an Internet company, Yoshitaka Kitao, president of Softbank Finance Corp., in his book, ``The Challenge of E-Finance II,'' published last month.
``Regarding the business area that we have not touched, first, the net banking area, this is the area that we have to be engaged in at any costs,'' he wrote.
``Net banking operations are indispensable to strengthen further the Internet financial services of the Softbank Finance group.''
Shrinking
Still, the group is buying a bank that shrank while under government control and has a struggling business.
Total assets fell to 8.4 trillion yen as of March 31, less than half the bank's size at its peak in the early 1990s and down from 14 trillion a year earlier. The change came from selling of loans to the government's loan collection agency and curtailed lending.
The bank, which was known as Nippon Fudosan Bank -- ``Japan real estate bank'' in Japanese -- for the first 20 years after its 1957 founding, still has about a third of its lending to real estate companies that are among the economy's least healthy. Meanwhile the ratio of lending to small companies and individuals fell.
The bank has 18 branches in Japan's major cities and maintains representative outposts overseas. It now has about 1,750 staff, half the number at its peak.
In the 12 months ended March 31, Nippon Credit eked out a 112 million yen annual net income, up from a 469 billion yen loss the year before.
While most nationwide banks saw huge gains from sales of stockholdings amid Japan's market boom, NCB saw a 74 billion yen net loss. The bank still holds about 1.1 trillion yen in stock.
The bank received a total 3.24 trillion yen of public funds in order to plug the gap.
Last week Moody's Investors Service, said it would maintain the NCB's ``Baa3'' rating, Moody's lowest investment-grade rating for long-term debt. Moody's earlier said it might increase the rating based on the strength of its potential buyers.
Softbank's shares rose 850 yen, or 4.3 percent, to 20,800. Orix fell 270 yen to 15,900 and Tokio Marine fell 41 yen to 1,163. |
