SBI Shinsei Bank to Repay ¥100 Billion Government Bailout

• SBI Shinsei Bank plans to repay ¥100 billion of government bailout funds by March end.
• The bank still owes ¥330 billion from the ¥370 billion state injection.
• The repayment is a step towards financial independence and relisting on the Tokyo Stock Exchange.
• The bank’s strong performance, with a 70% net profit increase, enables the repayment.

In a significant move, SBI Shinsei Bank, a major Japanese financial institution, has announced its intention to repay ¥100 billion of the government bailout funds it received. The repayment, scheduled for completion by the end of March, is part of the bank’s broader strategy to relist separately from its parent company, SBI Holdings Inc, on the Tokyo Stock Exchange.

SBI Shinsei Bank’s history is intertwined with the economic trajectory of Japan. The bank, in its previous incarnation as the Long-Term Credit Bank of Japan, was a key player in the country’s post-war economic development, providing crucial financing to vital industries. However, the bank fell victim to the economic bubble burst in 1998, leading to its collapse and subsequent bailout by the government.

The bank’s debt to the public purse has been a long-standing issue. Of the ¥370 billion injected by the state, the bank still owes approximately ¥330 billion. The upcoming repayment of ¥100 billion will be sourced equally from the bank’s equity capital and a contribution from its parent company, SBI Holdings Inc.

A Step Towards Financial Independence

The repayment plan is a significant step towards financial independence for SBI Shinsei Bank. It is the only major Japanese lender that has not fully repaid the public funds it owes from the time of its predecessor’s collapse. The bank’s management is keen to reach an agreement with the government to repay the remaining ¥230 billion as soon as possible, with a deadline for the agreement set for June this year.

The Long-Term Credit Bank of Japan’s journey from a key player in Japan’s post-war economic development to its collapse and subsequent rebirth as SBI Shinsei Bank is a testament to the resilience of the Japanese financial sector. After its bankruptcy, the bank was nationalized and sold to a consortium led by U.S. investment fund Ripplewood Holdings in 2000. It reemerged as Shinsei Bank and was relisted on the Tokyo Stock Exchange in 2004.

In 2021, the bank became a subsidiary of SBI Holdings and was delisted in September 2023 to allow for more flexible management and to facilitate the repayment of government funds. The bank’s recent performance has been robust, driven by growth in corporate lending and its securities investment business after becoming a unit of SBI Holdings.

Strong Performance Fuels Repayment

The bank’s net profit for the April-September period expanded by 70 percent from a year earlier to ¥44.3 billion, putting it in a strong position to achieve its full-year profit forecast of ¥70 billion. This financial strength is a key factor in the bank’s ability to start repaying the government bailout funds.

The repayment of bailout funds by SBI Shinsei Bank is reminiscent of similar events in the past. For instance, during the 2008 global financial crisis, many banks worldwide received government bailouts. As the economy recovered, these banks began repaying the funds, a move seen as a sign of the financial sector’s recovery and a return to normalcy.