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Don Harrold on Bear Stearns, Jim Cramer, The Federal Reserve, and JP Morgan

CNBC seems to have made a real mess-up with the graphics (Cramer’s not talking about share price at all, and he was correct in saying that they would get taken over). Nonetheless, here comes the anger:

Shinsei Bank sells Tokyo headquarters, joining Citibank; Resona announcement due by the end of the month

Apparently burdened by heavy subprime-related losses, Shinsei Bank has announced the sale of its Tokyo head offices to a real estate fund connected with Morgan Stanley. About a month ago, Morgan paid about $440 million to acquire Citibank’s Tokyo headquarters in Shinagawa. Shinsei’s headquarters, located across from Hibiya Park, went for about $1.18 billion.

Shinsei appears to be in a bit of trouble, with a steadily eroding share price - down about 34% since the end of January - and about $2 billion still owed to the Japanese government, thanks to a bailout about a decade ago, when the bank was known as Long Term Credit Bank.

Shinsei apparently intends to remain in the building for now (and hopefully they keep that Starbucks on the ground floor), but will be looking to move to a new location in about three years.

Earlier this week, it was announced that Resona Bank would also be putting their Tokyo headquarters up for sale, at a price in the $1.75 billion range. Resona is also burdened with repayment obligations to the government, and also intends to move office within the next few years. Resona’s share price has fallen about 16% since the beginning of 2008.

But back to Morgan Stanley, who certainly has been buying up a noticeable amount of Tokyo property. The Financial Times asks:

What we want to know is what drives Morgan Stanley’s seemingly unshakable faith in the value of Tokyo commercial property. As Bloomberg noted, Morgan Stanley has invested more than $18bn in the Japanese real estate market in the past decade and continues to buy property in the country even after reporting a fourth-quarter loss of $3.56bn, the first in the investment bank’s history.

We might find part of the answer in the fact that Morgan Stanley’s recent sale of the Tokyo Westin hotel to the Government of Singapore Investment Corporation for about 77 billion yen brought a return of over 50% in under four years.

FSA to keep an eye on Shinginko Tokyo, should it survive

Just in case you might have been considering applying for a loan at the cash machine otherwise known as Shinginko Tokyo, it has been announced that the Financial Services Agency intends to keep a “closer eye” on the bank’s lending activities, according to the Nikkei.

Shinginko Tokyo, which apparently loaned money to some 2,300 firms that went bust between April 2005 and January 2008, now lists 28.5 billion yen of its initial 100 billion yen of capitalization as unrecoverable. The bank is also running a deficit of 93.6 billion yen.

The Nikkei quotes Yoshinori Shimizu, a professor at Hitotsubashi University, as saying:

Financial authorities should probably have inspected or urged (ShinGinko Tokyo) to improve its business model before the bank’s financial strength was weakened this much.

That would have been a good idea (but then again, it’s just taxpayer money, right?) The bank is seeking an additional 40 billion yen capital injection from the city of Tokyo, which is somehow actually being considered - as are criminal charges against former members of the bank’s management. With the FSA watching, Shinginko Tokyo may no longer be synonymous with pure robbery, but the good times might not be over just yet - head down to Otemachi to hand in your application for a loan.

At Shinginko Tokyo’s opening ceremony in March 2005 (pictured), Tokyo Governor Ishihara Shintaro said, “This bank is absolutely essential in order to tap into Tokyo’s potential. I hope the entire Tokyo metropolis will get behind it.”

Potential what? Perhaps the governor meant that the citizens of Tokyo would be getting under the bank.

FSA: Let the regional banks fail, it’s Takenaka’s fault anyway

With few signs that problems at Japan’s regional banks are clearing up, it seems that some members of the Financial Services Agency are encouraging the government to let the banks fail. This would allow for depositors to receive up to 10 million yen of funds in their accounts, as the Japanese government capped its deposit guarantees at that level in 2005.

What happened? The Nikkei tells us this:

Since 1991, 181 financial institutions have filed for bankruptcy protection. About 80% of the total, or 144 filings, were submitted from 1998 to 2002. Hakuo Yanagisawa served as financial services minister during much of this period. After Heizo Takenaka took over the post in September 2002, however, only Ashikaga Bank went belly up.

And then lets us know that there is ‘a view’ that Takenaka’s relaxed stance on regional banks led to sloppy management practices, which led to the problems we see today.

Good to see they’ve found someone to pin the problem on.

Ashikaga Bank Bidding: Don’t Bother, Overseas Businesses

Were you planning to make a bid for state-controlled Ashikaga Bank? Well, don’t bother unless you’re Japanese. It seems as though the Financial Services Agency is set to exclude foreign businesses from bidding for control of the regional bank.

We’re forced to wonder how much the winning bid might already be set at.

Subprime car loans coming to Japan?

Granted, defaults on car loans will never add up to amounts anywhere resembling mortgage defaults (on a per contract basis), but this still seems like an awful idea, given the current climate and lessons that should have been learned:

Consumer financing firm Orient Corp. has formed a credit guarantee company jointly with Itochu Corp. to provide a new type of automobile loan to those with poor credit histories.

Basically, if you fail Orient’s credit test for a loan, they will serve as the guarantor of the loan and bump up the interest rate.

ING Direct expects to launch operations in Japan later this year

A move into the Japanese market for Dutch banking giant ING would expand its presence to countries representing approximately 70% of the global savings market. And guess what? That move is about to happen. From ING’s website:

ING Group announced today that it has initiated the process of obtaining a banking license from Japan’s Financial Services Agency (FSA) for ING Direct, ING’s direct banking arm. Subject to regulatory approval, ING Direct expects to launch its operation in the Japanese market in the second half of 2007.

This step is in line with ING Direct’s global strategy to enter large and mature markets with a developed infrastructure for direct banking. Japan is of key strategic importance and represents a large business potential with its €5.6 trillion savings market, a middle class of approximately 90 million people, and one of the world’s most advanced internet and telephone infrastructures.

ING launched their first global marketing campaign on March 15 of this year, just in time for the F1 Grand Prix in Melbourne, Australia, for which they were the title sponsor. ING has also experimented with viral marketing, including this bit:

The video was released in August of 2006. An employee of an IGN subsidiary wrote on his blog:

With reputation risk and compliance at the forefront of every bankers mind these days, the step to start a campaign like this is very brave…[American consumers] might even have been waiting for something like this, given ING Direct’s reputation of challenging and non-traditional campaigns…As of this moment the video’s have been watched around 100 – 200 times each. I wonder what it will be in a week’s time? Keeping a tight watch on “ING Direct on Technorati.”

I don’t know what the play count was a week later, but eight or nine months later it’s…umm…799. Ouch. I’d say make it 800, but actually, you’d ask me for the 28 seconds of your life back.

Japan’s Foreign Reserves up to Record High for Third Straight Month

Someone asked: What was up with the chart showing Japanese exports out of the blue the other day? Was that in some sort of context?

It was. I was supporting David Andrew Taylor’s assertion that the Ministry of Finance’s announcement that week that Japan’s foreign reserves had hit all-time highs for three months in a row was related to the surge in exports that we have seen since at least January 2004.

As of April 30, Japan’s foreign reserves had hit $915.62 billion, which was up over $6 billion from the month before. Sure, there was an increase in Euro-denominated holdings, but I’m apt to think that as Japan’s exporters are bring home more and more foreign currency, the smoothing operations are just starting to pick up.

I’ll say it now: I don’t expect to see a cooling off in exports (defined here as matching or going below the same month in the previous year) until June or July, if it happens at all.

Tokyo Losing Ground as a Financial Centre!

Nearly a week ago, we reported on the rumor that the Japanese government was seeking to build a district for foreign businesspeople in Tokyo, to be modeled on London’s financial centre.

Then, today we got a piece from the Business Standard entitled Tokyo losing ground as a financial centre, which opens with this sentence: “The Japanese capital is looking increasingly in danger of being threatened by Hong Kong and Singapore.”

The article goes on to state:

Part of the problem is that, while the country was caught up in a prolonged financial crisis, its capital markets failed to keep up with global developments in key areas.

That’s a bit of an understatement. We’re still waiting for the shift from manufacturing to services to truly take root - in the education system as well as the economy - which even the government acknowledges. As financial services minister Yuji Yamamoto put it, “Japan cannot be totally dependent on manufacturing alone.”

Of course, service industries do account for about 40% of GDP, although their labor productivity lags at about 60 percent of US figures.

At any rate, you know it’s bad when not only the foreign firms are choosing to put their people in Hong Kong and Singapore:

Most Japan-focused hedge funds are also located outside the country and even big investment banks have staff in neighbouring cities doing work that would normally be done in Japan. “We have Japanese jobs being done by people in Hong Kong,” concedes the head of a foreign investment bank.

Of course, tax laws have something to do with the hedge funds not being in Japan, but this reporter doesn’t let that get in her way of making a point.

Anyone remember Yoshiaki Murakami’s MAC? The Murakami Fund moved its operations to Singapore as soon as it could. On a side note, I remember seeing an Asahi TV report on the Murakami Fund in which the reporter complained that when he called their office (in Singapore), no one there either could or would speak Japanese with him, so he had to communicate in English.

Telling.

Tokyo Star for sale? Advantage Partners interested?

According to Bloomberg, Advantage Partners LLC, Japan’s largest buyout fund, is interested in acquiring Tokyo Star Bank for a price in the neighborhood of 290 billion yen ($2.4 billion). If the transaction happens, it will be the nation’s largest bank takeover in two years. Advantage Partners is reportedly considering buying the 67 percent stake in Tokyo Star Bank that is currently held by US-based hedge fund Lone Star.

Bloomberg speculates that:

The acquisition may herald more financial mergers in the world’s second-largest economy as companies compete for a greater share of the nation’s $12 trillion of household savings.

In 2001, Lone Star bought then-bankrupt Tokyo Sowa Bank for 40.3 billion yen, renamed it Tokyo Star, and took the bank public four years later, raising 86.6 billion yen.

No word yet as to whether or not Tokyo Star intends to put measures in place to defend against a possible takeover…

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