A couple of opinions on the NCB deal:
Orix eyes capital gains from sales of NCB shares in 3-5 years
TOKYO, June 7 (Kyodo) -- Orix Corp., part of a tripartite group that clinched
Tuesday a deal to buy the failed Nippon Credit Bank (NCB), expects capital gains
from sales of NCB shares after listing NCB on bourses in three to five years,
its president said Wednesday.
''First of all, we will rake in profits by unloading a part of our holdings of
NCB shares after we return the bank's shares for trading at stock exchanges in
three to five years,'' Orix President Yasuhiko Fujiki said in an interview with
Kyodo News.
NCB was delisted from the Tokyo Stock Exchange when it was put under state
control in December 1998 after it had amassed huge loan losses.
''Secondly, we will have a group of regional financial institutions with
business ties to NCB sell a range of financial products that are now being
marketed by the Orix Group of financial companies,'' Fujiki said.
The Orix group, which includes Orix Trust and Banking Corp., a small trust bank,
is now marketing insurance policies, mutual funds and leasing contracts, in
addition to taking deposits and loaning money.
''We expect to benefit from a range of synergy effects'' by acquiring NCB in
collaboration with Japan's biggest nonlife insurer Tokio Marine & Fire Insurance
Co. and leading Internet investor Softbank Corp., the leader of the consortium,
Fujiki said.
Fujiki, who took over as the president of Orix in April, made the remarks when
asked why Orix decided to buy a stake of about 15% in NCB.
The consortium announced Tuesday it will pay 70 billion yen to replenish NCB's
capital base in a deal that would give the consortium a stake of 70% to 80% in
the bank. Orix will hold 15% of the 80% stake.
The consortium also said it expects a group of two to three foreign banks and up
to 30 Japanese regional banks to inject 30 billion yen into NCB's capital
account, with the government pumping in a further 240 billion yen to enhance the
capital base.
''It is necessary (that the consortium and other NCB investors) secure an
aggregate investment sum of some 100 billion yen, and our company will put up
some 15% of this tally in view of the risks involved in the investments,'' he
said.
Fujiki said his company saw advantages in forming an alliance with Softbank and
Tokio Marine & Fire due to Softbank's advanced IT technology and the status of
the giant insurer, rather than add more banks to the consortium.
Asked about the outlook of Orix's core leasing business, Fujiki said the company
wants to capitalize more on innovative leasing contracts rather than placing
emphasis on conventional leasing, which has seen intensifying competition
squeeze margins.
Asked for his view on the huge irrecoverable receivables from its leasing
business in China, Fujiki said, ''What matters is how to recover as many
receivables (that have so far remained irrecoverable) as possible.''
Making inroads into the Chinese market ''was a serious goof in view of the
absence of that country's legal protection (for such receivables),'' he said.
''Although that country has a giant market, we are not interested in renewing
efforts to cash in on the market,'' he added.
Reborn NCB to take advantage of Softbank's technology
TOKYO, June 6 (Kyodo) -- A reborn Nippon Credit Bank (NCB), to be created under
new management led by Softbank Corp., will take advantage of its new owner's
Internet technology, but uncertainty lingers over its business strategy,
analysts say.
Softbank, for its part, has invested in or tied up with numerous Net businesses,
varying from booksellers to financial institutions, as part of Softbank
President Masayoshi Son's goal to make the company an Internet-based
conglomerate.
However, analysts question whether Softbank will benefit from the purchase of
the failed long-term credit bank, which was nationalized in December 1998 after
failing under the weight of huge bad loans.
''It's hard to understand the purpose of this purchase, as Softbank has no
experience in the banking business,'' said an analyst at Nikko Salomon Smith
Barney Ltd. ''It would be better to devote itself to the Net business.''
Son told a press conference Tuesday that a reborn NCB will provide financial
services via the Internet, mainly targeting individuals and start-up companies.
Having set up brokerages and other financial affiliates to embrace individual
customers, Softbank plans to incorporate the new NCB into its online financial
services, Son said.
Although NCB has little footing in retail banking, Softbank expects it to
compete successfully with old-fashioned financial institutions saddled with high
personnel costs and limits on operating hours.
However, conventional banks have also become increasingly committed to Internet
banking, such as Sakura Bank, which recently applied for a banking license to
jointly set up an Internet-only bank with computer maker Fujitsu Ltd. and
others.
This means that Web-based competition will count on the expertise of the
traditional banking business, such as the ability to develop attractive
financial products, analysts say.
The profitability of lending to ventures, another strategic pillar for the new
NCB, also seems unpredictable since it requires analytical know-how, they said.
There are even worries that Softbank will let the new NCB become an apparatus of
the group, by having it extend loans to its Net ventures without making
sufficient checks on their viability, they said.
Under new rules adopted by the government's Financial Reconstruction Commission
in May, nonfinancial companies with banking subsidiaries are required to present
to the financial industry regulatory body measures to protect the banks in case
their shareholders fall into financial trouble.
The consortium will submit a package of measures to prevent NCB from being
affected by financial difficulties of its shareholders.
Softbank, however, posted a consolidated pretax loss of 51.9 billion yen in the
year ending March 31, the second consecutive year in the red.
Since Softbank has expanded on the back of surging stock prices, there lies
concern about whether it can keep doing so given the recent plunges in high-tech
issues worldwide, analysts said.
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