June 12, 2019 / 3:07 PM / a month ago

Japan's Shinsei mulls Asia investment, but lender Suruga not M&A target: CEO

FILE PHOTO: A woman walks past a logo of the Shinsei Bank at its branch in Yokohama, south of Tokyo, June 23, 2010. REUTERS/Issei Kato

TOKYO (Reuters) - Japan’s Shinsei Bank is looking to invest in a non-bank financial firm at home or in Asia, its chief executive said, ruling out the possibility that local lender Suruga Bank could be a target following an announcement of a tie-up last month.

Shinsei, the Japanese bank whose top shareholder is private-equity firm JC Flowers & Co, is grappling, like other domestic lenders, with thin margins amid an ageing population and massive central bank stimulus. Now, signs of another economic downturn are threatening to weigh on banks in the country.

While it has made a push into higher-margin, consumer lending and structured finance, Shinsei has focused on its home market, unlike megabanks such as Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group that have tapped overseas markets.

“In terms of our M&A strategy, we will mainly target non-bank financial firms in Japan and Asia,” Shinsei CEO Hideyuki Kudo said in an interview with Reuters earlier this week that was embargoed for release on Thursday.

“We need to utilize our capital to boost our ROE,” he said, referring to return on equity, a measure of profitability.

In Shinsei’s mid-term plan, it is aiming to raise its ROE to 8% from 6% in fiscal 2018.

But Kudo poured cold water on recent speculation that it could acquire scandal-hit regional lender Suruga Bank after the pair agreed on a business tie-up last month.

While Shinsei could make an investment in Suruga to help with its turnaround, it would not consider it as an M&A target, CEO Kudo said.

“It is not our strategy to acquire regional banks.”

Reporting by Takahiko Wada; Writing by Takashi Umekawa; Editing by David Dolan

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