Shinsei to suffer $1.1 billion annual loss: sources

By Taro Fuse and Taiga Uranaka

TOKYO (BestGrowthStock) – Shinsei Bank will likely tumble to a net loss of about $1.1 billion for the year just ended due to bigger provisions against property loans, and the head of the struggling Japanese lender will resign, two sources with knowledge of the matter said.

Shinsei, one-third owned by U.S. buyout firm JC Flowers, has officially forecast a net profit of 10 billion yen ($107.3 million) for the year ended last month, a swing back to profitability following a loss a 143 billion yen loss the previous year.

But the bank, prodded by an inspection by the country’s financial regulator, will boost loss provisions against its roughly 900 billion yen portfolio of non-recourse property loans, the sources said. It has also been hit by the performance of its struggling consumer lending business, they said.

Shinsei declined to comment. The sources spoke on condition of anonymity because they were not authorized to talk to the media about the issue.

The loss would mark the second consecutive year the bank has missed its financial targets, a shortfall that could prompt the Financial Services Agency to order it to improve its operations and result in the resignation of President Masamoto Yashiro, the sources said.

Shares of Shinsei rose 1.7 percent to end morning trade at 123 yen following the news, which was first reported by the Nikkei business daily.

The market has been expecting a loss. The average of 3 analysts polled by Thomson Reuters I/B/E/S projects a loss of 87.5 billion yen.

“Rather, our concern is how much its capital ratio, especially that of Tier 1, will go down by this and how much Shinsei will clean up its legacy overseas assets,” said Ehsan Syed, director at Fitch Ratings in Tokyo.

The Nikkei said that despite the loss Shinsei likely maintained a capital adequacy ratio of 8 percent, the cut-off for globally operating banks.

Shinsei has not yet fully paid back bailout money it received following Japan’s banking crisis in the 1990s.

The Nikkei said that Isuzu Motors Ltd director Shigeki Toma is a leading candidate to replace Yashiro.

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(Additional reporting by Supantha Mukherjee in Bangalore; Editing by Michael Watson)

Shinsei to suffer $1.1 billion annual loss: sources