Creating a Better Bank - Ministry of Foreign Affairs
Transcript of Creating a Better Bank - Ministry of Foreign Affairs
Creating a Better BankCreating a Better Bank
Shinsei Bank, Limited
Hiroo, SFCCorporate Headquarters & Main Branch, Tokyo Roppongi Hills, SFC Virtual Call Center
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Shinsei Bank
• In 1998, LTCB failed and was nationalized
• Government tried to sell LTCB to primarily Japanese banks, but no serious Japanese bidders found
• New LTCB Partners, a fund by investors led by Ripplewood and J.C. Flowers won the bid
• The new bank started in March 2000 as Shinsei, the “newly-born” bank
2
Shinsei Bank Needed a Complete Overhaul
• Business model outdated and had a limited future
• Shinsei Bank was saddled with huge NPL problems even after the government’s bailout
• NPLs were JPY 1.9 trillion at the beginning of fiscal 2000, equal to 22% of the total loan assets
3
Returning the Bank to Health: Action Plan
• Clean-up balance sheet
• Initiate customer-centric business initiatives
• Institutional: Solution-oriented investment banking products
• Retail: New retail launch with emphasis on convenience, service and efficiency
• Leverage state-of-the-art information technology
4
Institutional Banking: Shinsei’s Approach• “Loan is one of many products”
• Customer-centric investment banking services– Securitization– Credit trading– Non-recourse lending– M&A, asset management and more
• Skilled bankers with wide knowledge and experience hired from outside
• Co-work with relationship management
5
Retail Banking: Shinsei’s Approach
• “Customer convenience and service”
• Expansion of retail channels
• Modernize image and product line-up
• Introduce “PowerFlex” accounts– Management of retail banking from single source– Broader offering of financial management products
• Introduce “PowerSmart” Housing Loans
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IT: Shinsei’s Approach
• New CIO brought in
• IT as business process serving internal and external customers
• Time urgency and budget limit
• Heavy utilization of resources from India
• MIS implemented quickly
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Corporate Governance: Shinsei’s Approach
• Implemented global standard governance model
• Prominent business leaders appointed as independent board members and senior advisors
• Audit Committee, Nomination and Compensation Committee established
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Corporate Culture: Shinsei’s Approach
• Transparent management and reporting
• Accountability and speed in decisions
• Goals aligned throughout organization
• Higher motivation for success
9
Human Resources: Shinsei’s Approach
• Seniority-system ended
• Mid-career hiring
• 60% ex-LTCB employees, 30% mid-career hiring, 10% newly grads
• Culture mixed with various backgrounds
• Specialized skills and experiences emphasized
PERFORMANCE
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Balance Sheet – Results
• Dramatic reduction of non-performing loans
Reduction of NPLs (1)
JPY Bn %
Reduction of NPLs (1)
JPY Bn %
1. Non-consolidated basis
1,865
1,2961,114
23397
20.0%
22.0%
2.8%
5.7%
19.0%
0
500
1,000
1,500
2,000
2,500
3/2000 3/2001 3/2002 3/2003 3/20040%
5%
10%
15%
20%
25%
NPL Amount NPL Ratio
1. Non-consolidated basis
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Revenue CompositionJPY Bn %
Revenue CompositionJPY Bn %
16.031.3 41.6
66.3
85.8
88.4 66.1
57.2
54%
15%
27%39%
46%
85%
73%
61%
0
30
60
90
120
150
3/2001 3/2002 3/2003 3/20040%
20%
40%
60%
80%
100%
Net Interest Income/RevenueNon Interest Income/Revenue
Net Interest IncomeNon Interest Income
• Further progress in revenue diversification
• Non-interest income growth more than offsetting interest income decrease
Institutional Banking – Results
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Growth in Asset Under Management (AUM) and Number of Accounts
JPY Tn Accounts (Thousands)
Growth in Asset Under Management (AUM) and Number of Accounts
JPY Tn Accounts (Thousands)
Growth in PowerSmart Housing Loans
JPY Bn Customers (Thousands)
Growth in PowerSmart Housing Loans
JPY Bn Customers (Thousands)
Retail Banking - Results
• Number of accounts reached 1,000,000 thus far
• “PowerSmart” reached JPY 140 billion in March 2004
0
20
40
60
80
100
120
140
160
3/02 9/02 3/03 9/03 3/040
1
2
3
4
5
6
7
8
Loans Outstanding Customers
0.0
0.5
1.0
1.5
2.0
2.5
3.0
6/01 9/01 3/02 9/02 3/03 9/03 3/040
200
400
600
800
1000
1200
AUM Number of accounts
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Total Revenue and Net Income
Total RevenueJPY Bn
Total RevenueJPY Bn
120108
124
0
20
40
60
80
100
120
140
FY2001 FY2002 FY2003
Total Revenue
Net IncomeJPY Bn
Net IncomeJPY Bn
61 5366
0
20
40
60
80
100
120
140
FY2001 FY2002 FY2003
Net Income
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ROA and ROE
ROA and Total Assets% JPY Bn
ROA and Total Assets% JPY Bn
0.7% 0.7%
1.0%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
FY2001 FY2002 FY20033,000
4,000
5,000
6,000
7,000
8,000
9,000
ROA Total Assets
ROE and Equity% JPY Bn
ROE and Equity% JPY Bn
10.1%8.1%
9.4%
0.0%
4.0%
8.0%
12.0%
16.0%
FY2001 FY2002 FY2003400
500
600
700
800
ROE Equity
(Total Assets and Equity are as at March 31 of each fiscal year)
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Our Goals
• Bank of choice for institutional / retail customers
• Sustainable long-term growth of profitability
• Increasing shareholders’ value