Questions remain over Shinsei Bank’s public fund repayment

Jiji Press

November 26, 2021

TOKYO (Jiji Press) — The expected takeover of Shinsei Bank by major online financial group SBI Holdings Inc. leaves some questions unanswered, such as how public funds injected into the bank will be paid back.

“We’ll work as one with Shinsei Bank to fulfill the mission of paying back some ¥350 billion in public funds,” Yoshitaka Kitao, SBI president and CEO, said in a blog post by Friday, although the financial group has not indicated any specific repayment plan.

On Wednesday, Shinsei Bank withdrew its planned takeover defense measure against SBI, effectively ensuring that it will come under the SBI group’s umbrella.

Government-affiliated Deposit Insurance Corp. of Japan and subsidiary Resolution and Collection Corp. together own an equity stake of over 20% in Shinsei Bank, after the government injected public funds into the bank’s predecessor, Long-Term Credit Bank of Japan, which became insolvent in 1998 under the weight of massive bad loans.

In order for the government to recoup the injected funds through the sale of its shareholdings in Shinsei Bank, the bank’s stock price must rise to at least ¥7,450 per share.

On the Tokyo Stock Exchange Thursday, the closing price for Shinsei Bank’s stock stood at ¥1,947 per share, down ¥11 from the day before, after market players factored in the likely success of SBI’s takeover of the bank. Even if the bank comes under the wing of SBI, it is widely expected to find difficulty raising its share value 3.8-fold.

SBI said that it will boost the corporate value of Shinsei Bank, which is expected to be a core bank in the financial group, by creating synergy through cooperation with regional banks that have ties with SBI.

The financial group said it will aim to raise Shinsei Bank’s net profit to ¥71 billion in the fiscal year ending in March 2025, up around 60% from the year that ended in March 2021.