Foreign Investors Stake Claim on Japan's Banks

Japan's banking industry, once shunned by international investors due to debt and deflationary economic woes, is now attracting the attention of foreign investors. US private equity companies and global investment banks are forming joint ventures with Japan's largest lenders, positions that will allow them to benefit from the restructuring of loan portfolios. In return, Japan is developing the infrastructure necessary for corporate restructuring, presenting foreign and domestic investors with opportunities across various sectors.

Key Takeaways:

• Three Japanese banks are now owned by foreign private equity companies, including Tokyo Star Bank, owned by Lone Star, and Aozora, owned by Cerberus.
• Foreign investment banks have formed joint ventures with Japan's largest lenders, including SMFG, Japan's second-largest bank, with Goldman Sachs, and Mizuho, with five international finance companies.
• The Shinsei consortium, led by Ripplewood, acquired the collapsed Long Term Credit Bank and renamed it Shinsei, generating outstanding returns for the investors and sending a clear signal that banking reform in Japan is a highly profitable reality.
• Foreign investors, including Carlyle and Longreach, are positioning themselves to benefit from strategic divestments of non-core businesses in Japan, aiming to create more globally competitive and profitable Japanese companies.
• Japan's largest lenders, including SMFG and Mizuho, are setting up joint ventures and new companies to help restructure problem loans and advise borrowers on revitalization.

Statistics:

• Japan's banking industry has seen a significant influx of foreign investment, with foreign investors staking a claim on three Japanese banks.
• The Shinsei consortium invested $1 billion in the bank in 1998 and sold half its stake three and a half years later for $2.36 billion.
• The Shinsei consortium stands to receive up to 500% of its original investment once the remainder is offloaded.
• Foreign investment banks have formed joint ventures with Japan's largest lenders, with Goldman Sachs investing ¥150 billion ($1.4 billion) in SMFG.
• Mizuho has set up a new company called Mizuho Advisory, which will help restructure up to ¥4,600 billion ($41 billion) in problem loans.

Sources:

• David Ibison, "Foreign Investors Stake Claim on Japan's Banks,"
• Tamotsu Adachi, managing director of the Tokyo operations of Carlyle, cited in the article.
• Masamichi Yoshizawa, a partner of Longreach, cited in the article.