Shinsei, Aozora likely to seek public money -Nikkei

TOKYO, July 1 (Reuters) - Shinsei Bank (8303.T) and Aozora Bank (8304.T), to Japanese lenders in the throes of merging, are likely to seek an injection of public funds to shore up their capital, the Nikkei business daily said on Wednesday.

The two loss-making lenders, both backed by U.S. investors, want to bolster their capital ahead of a merger on October 1, the paper said without citing sources.

The two banks will announce merger plans on Wednesday, sources familiar with the matter said [ID:nT58680].

A merger will create Japan's sixth-largest bank by assets, overtaking Chuo Mitsui Trust Holdings (8309.T) and putting it closer in size to rivals such as Resona Holdings (8308.T) and Sumitomo Trust and Banking (8403.T).

Aozora is majority owned by Cerberus Capital Management [CBS.UL], while Shinsei is about one-third owned by buyout firm JC Flowers and Co.

Both Shinsei and Aozora have logged losses on U.S. subprime mortgages and other toxic assets, prompting them to say they aim to shift focus on domestic lending, rather than on overseas investments.

The two banks were nationalised following Japan's banking crisis a decade ago, with the two banks and their predecessors receiving 621 billion yen in public money. They were later sold to their foreign owners, who have been criticised by the Japanese media for making massive windfalls on bad banks. (Reporting by Mayumi Negishi; Editing by Rodney Joyce)